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View Full Version : How do you deflate an economy?




Warrior_of_Freedom
08-20-2009, 10:59 AM
I know inflation occurs from overprinting money, but how does that get reversed? Wouldn't the only way be to destroy the money?

Kraig
08-20-2009, 11:02 AM
Not necessarily, wealth can be created, so a society could theoretically create enough wealth to compensate for the inflation I would think. More often than not I think they just use the currency for all it's worth and then move on to something else once it's completely worthless.

torchbearer
08-20-2009, 11:03 AM
if money gets into circulation via loans, the money is destroyed by paying back the loans.

Chester Copperpot
08-20-2009, 11:04 AM
They try to "grow" the economy to increase demand for the dollars...

But to deflate properly I would agree money has to be destroyed..

t0rnado
08-20-2009, 11:22 AM
You would raise interest rates

Chase
08-20-2009, 11:29 AM
You would raise interest rates

That just parks the money (or, rather, encourages people to park it). Money supply doesn't change.

Want to shrink money supply? Tax the people, and then put the money into a pile and burn it.

Kraig
08-20-2009, 11:43 AM
if money gets into circulation via loans, the money is destroyed by paying back the loans.

No it isn't because the money is going to continue to circulate, it's not like banks take loan payments and never spend it.

torchbearer
08-20-2009, 11:48 AM
No it isn't because the money is going to continue to circulate, it's not like banks take loan payments and never spend it.

the money isn't in circulation if its in the vaults.
no more loans, no more money.

Kraig
08-20-2009, 11:50 AM
the money isn't in circulation if its in the vaults.
no more loans, no more money.

Yeah but that's it exactly, it doesn't stay in the vaults. Banks don't work for the sake of having a vault filled with paper money, they want real wealth like everyone else.

torchbearer
08-20-2009, 11:51 AM
Yeah but that's it exactly, it doesn't stay in the vaults. Banks don't work for the sake of having a vault filled with paper money, they want real wealth like everyone else.

stop inflation. don't use loans.
solves the problem.
then people can just use their gold coins.