How To Stop Inflation

It’s not complicated. To stop inflation, you need to stop feeding it. It is fed by adding credit, that is, increasing debt. Doesn’t matter whether in the private or public sectors. The usual ways to discourage additional debt are to increase its price, i.e. interest rates, and reduce or eliminate public deficit spending.

If you don’t do any of these things, inflation spirals and eventually becomes hyperinflation when the public realizes that the government is unable to control its spending. The economy and the currency collapse.

If you do both these things, the economy shrinks. Recession. Inflation eventually responds and interest rates can be reduced. Economic growth is resumed.

If the government doesn’t do its part, then the private sector must do more, usually by massive defaults. Depression. Long and painful, usually ending in war.

The so-called soft landing where inflation falls without recession only occurs when the inflation was exogenous. This is not the case today. This inflation is the result of years of bad policy and over-spending. There will be exogenous effects from the Russia sanctions, but so far they have had little or no impact.

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