Okay so as far as I’m understanding it, we have (and also want to have for economical reasons, the amount can be discussed but in general we want that) inflation. Therefore money becomes always less and less valuable, the ice cream will always cost more and more. Can you reverse that process without going into recession/deflation? So will there ever be a point again, at which an ice cream will cost 50ct again (random example)? Can that be reversed by introducing a new currency?
In: 2
It’s possible, in theory, that a currency can be ‘repegged’ and have all “old” dollars replaced with “new” dollars, such that each “new dollar” is worth, say, 10 “old dollars”, trade them all in, and now $5 is labeled as 50ct. Countries that have experienced hyperinflation have done this; once they (think they) have stopped the rampant inflation, they’ll get rid of the zillion dollar bills and trade them in for new dollars that are back to ‘reasonable’ face values.
Reversing inflation is simple, but of course simple does not mean easy. Broadly speaking, the total supply of money represents the total value of the economy; the way to reverse inflation is to have the value of the economy grow faster than the government prints money. (It’s possible that if the money supply grows too small, it can actually impede trade and hurt the economy, but we’re nowhere near that.) Of course getting the government to stop printing money is borderline impossible, but that’s hardly relevant to the question at hand.
Latest Answers