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Reasonable levels of inflation usually goes hand in hand with economic growth. On the other hand, growing the money supply too quickly when there's no economic

by Mikeb85 12y ago

Reasonable levels of inflation usually goes hand in hand with economic growth. On the other hand, growing the money supply too quickly when there's no economic growth leads to a situation like Zimbabwe...

Someone 12y ago
The correlation between inflation and lower growth is not as strong as one would think. See for example the graphs on pages 22-23 in http://www.frbsf.org/economic-research/publications/98-1/15-28.pdf http://www.frbsf.org/economic-research/publications/98-1/15-... and the number of 'generally supports', 'probably' and 'may exceed' phrases in the conclusion. But yes, 'too quickly' is not a good idea.
- Mikeb85 12y ago
  > The correlation between inflation and lower growth is not as strong as one would think. Of course not. Inflation is a symptom and not a cause. If lower inflation or even deflation lead to growth, then a penny should still have value, and a dollar should be a good amount of money (we've abolished 1 cent coins altogether, and a dollar buys very little). But our economy has grown a lot since the 1950's, and inflation has happened. Inflation is caused by many things. In Zimbabwe's case, they tried to print money to finance various things. With no underlying value, the money quickly devalued. In the case of Canada, the US and other western nations, we've enjoyed economic growth, but because demand for goods and services has generally outpaced supply, prices have gone up. Right now where I live, an 'average' house costs $450K. Anyhow, thanks for the link, but I've spent too much time looking at Solow equations for my liking (currently doing a degree in economics).
ArkyBeagle 12y ago
Zimbabwe was a failed state before it had hyperinflation. i won't say that we get good answers on the difference between moderate and hyperinflation, but I am sure there is a difference. Hyperinflation is just a good apocalyptic narrative device, and people (ab)use it. edit: s/has/had

by Mikeb85 12y ago

Someone 12y ago

The correlation between inflation and lower growth is not as strong as one would think. See for example the graphs on pages 22-23 in http://www.frbsf.org/economic-research/publications/98-1/15-28.pdf http://www.frbsf.org/economic-research/publications/98-1/15-... and the number of 'generally supports', 'probably' and 'may exceed' phrases in the conclusion. But yes, 'too quickly' is not a good idea.

Mikeb85 12y ago
> The correlation between inflation and lower growth is not as strong as one would think. Of course not. Inflation is a symptom and not a cause. If lower inflation or even deflation lead to growth, then a penny should still have value, and a dollar should be a good amount of money (we've abolished 1 cent coins altogether, and a dollar buys very little). But our economy has grown a lot since the 1950's, and inflation has happened. Inflation is caused by many things. In Zimbabwe's case, they tried to print money to finance various things. With no underlying value, the money quickly devalued. In the case of Canada, the US and other western nations, we've enjoyed economic growth, but because demand for goods and services has generally outpaced supply, prices have gone up. Right now where I live, an 'average' house costs $450K. Anyhow, thanks for the link, but I've spent too much time looking at Solow equations for my liking (currently doing a degree in economics).

ArkyBeagle 12y ago

Zimbabwe was a failed state before it had hyperinflation. i won't say that we get good answers on the difference between moderate and hyperinflation, but I am sure there is a difference. Hyperinflation is just a good apocalyptic narrative device, and people (ab)use it. edit: s/has/had