Pages

Wednesday, 17 October 2012

Benefits of daily inflation-indexing the entire money supply


Benefits of daily inflation-indexing the entire money supply
 
The benefits of daily inflation-indexing the entire money supply at all levels of inflation and deflation under complete co-ordination (everyone doing it) would be:
1. It would remove only the entire cost of or gain from inflation and deflation from only (except from actual bank notes and coins) the entire monetary economy - inflation has no effect on the real value of non-monetary items - under complete co-ordination at all levels of inflation and deflation. It would do nothing to actual inflation or deflation. The monetary economy, however, would operate as if there is no inflation or deflation - at whatever level of inflation and deflation. Monetary items (excluding bank notes and coins) would have constant real values over time.
 
2. As far as comparing its benefits to the benefits of a currency board or dollarization to stop hyperinflation is concerned: it would remove the entire cost of hyperinflation from the entire monetary economy (excluding bank notes and coins) while an economy using a currency board or dollarizaton to stop hyperinflation would still be subject to the cost of and gain from inflation or deflation of the currency board currency or dollarization currency as well as the cost of or gain from the stable measuring unit assumption in the currency board currency or dollarization currency.
 
3. There would be no currency board currency (foreign exchange) needed.
 
 
 

Nicolaas Smith

Copyright (c) 2005-2012 Nicolaas J Smith. All rights reserved. No reproduction without permission.