4 ms·
"On top of that the government inflates the currency every year by 3-5%" Do you mean the inflation? Is so, this is more around 2%, and not directed by the gover
by jusob 17y ago
"On top of that the government inflates the currency every year by 3-5%" Do you mean the inflation? Is so, this is more around 2%, and not directed by the government.
- nazgulnarsil 17y agoum...the federal reserve directly controls the interest rate paid by banks, which affects how much money is injected into the system. via the money multiplier new money disseminates out into the economy, causing inflation. how is it not government?
- jusob 17y agoThe federal reserve does not control the price of oil for example. Controlling inflation is one of its function. Again: controlling it, not setting the inflation rate. For example, there are/were fear of deflation when the inventory was high, and the demand low. With a interest rate set at pretty much 0%, there is not much else the reserve bank can do. So I stand by my statement, the government does not "inflate the prices by 3-5%" a year.
- nazgulnarsil 17y agointerest set to 0% certainly is inflationary since that means real interest is negative. government doesn't control the prices of commodities directly, but if the money supply was kept static you'd get continual mild deflation.