Hyperinflation in Weimar, Zimbabwe and Venezuela

6 responses to “Hyperinflation in Weimar, Zimbabwe and Venezuela"

1. Or: If only the money corresponds to what you are able to produce in the short term and sell, then everything goes well. If there is more money than there is to buy with the money, there will be inflation. Like for example. the banks' real estate loans compared to currently existing homes to buy for the loans. In that case, there would be no inflation (=increased housing prices) if instead the loans were given to construction companies.

   Or?

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   1. There is an unknown amount that the money can exceed the size of the production, but it is uncertain how big this can be. But the healthy thing is to put budget increases into increased production. Giving construction companies attractive loans for new production is a form of sound investment.

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   2. The basic principle is that money equivalent to production does not lead to inflation. Then there is a certain need for e.g. private savings that do not lead to inflation. It is uncertain where the limit is where the amount of money becomes too large, but history shows that we can handle some too large amounts of money. Bank interest is e.g. money created without any debt holders as far as i understand.

      But you shouldn't be too afraid of the amount of money because then you end up in Milton Friedman's idea that low and middle income earners must starve because otherwise there will be inflation.

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2. Chris Dillow recently had a discussion about this where he argued that there will be no better healthcare just because you put more money into it; the quality of healthcare depends on how many people work with it, and they cannot be multiplied easily. See https://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2023/05/no-magic-money-trees.html

   Now that particular example happens to be wrong according to a Norwegian report that has also looked at the situation in the UK, see https://velferdsstaten.no/2023/06/06/rapport-den-internasjonale-velferdsprofitten-og-bendelormokonomien/. There it just so happens that the constant cutbacks have led to lots of healthcare-educated people looking for other professions. So it is quite easy to get them back by investing more money.

   But then less will be done in the industries to which they moved instead.

   It is the production resources that determine how much you can do, not the money. But money can act as fertilizer, to speed up production resources that are otherwise stagnant.

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   1. Although most countries still have a large group of unemployed people, we labor market graduates could get the jobs that healthcare personnel would leave to go back to healthcare.

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      1. It takes a while. A nursing education, e.g. takes three years - in addition to high school with decent grades.

         I also think that we need technical training of the kind they have in Switzerland. Lots of people are allergic to academic training and would rather do something with their hands. A technical industrial worker education in Switzerland is in many ways fully comparable to a civil engineering education in Sweden, says one of my friends at KTH. But they are completely different, appeal to completely different kinds of people.

         But how do you get over-academic politicians in Sweden to understand that? Especially when they have the so-called bologna process behind them, which says that all professions should be academicized?

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