The best inflation policy for Canada

[Machjo]

Which do you think would be the best policy for the Canadian government to adopt:

1. Maintain constant low inflation.

2. Pin the currency, making it illegal to trade it at any other value.

3. Aim the currency towards a particular target value, inflating or deflating it as needs be to bring it towards that value at all times, yet still allowing people to trade it at market value.

4. Maintian constant deflation.

5. Other option.

 

[Machjo]

One option I did not include is a gold standard. I'd personally support going back to a gold standard, but though that would be more of a long-term plan. The plans presented in the OP could theoretically be implemented within a government's mandate.

Well, a gold standard too, but only through some kind of shock and awe tactic.

But among the options above, I'll be voting option 3, as it has an impact similar to a gold standard in that it eliminates long-term currency fluctuation while still allowing the currency to float at a market rate thus avoiding a black market in as could occur with option 2.

 

[JLM]

Personally I'd like to see everything, prices, wages divided by 10 to bring things back to some semblance of normal. It's bullsh*t needing a wheel barrow to pack enough money to the grocery store for a couple of bags of groceries. When I was growing up a millionaire was a somebody, now that will simply buy you a high priced over inflated house. It's past the point of insanity.

 

[Machjo]

Someone voted 4. Interesting While it could certainly have the advantage of encouraging savings, could it not also risk excessive savings in the id to see prices drop further, the very deflationary spiral that can lead to more severe recession?

That said, I must admit that if it were a choice between 1 and 4, I'd choose 4 as long as we had no price controls such as minimum wages since that way prices and salaries would be free to drop side by side, thus possibly mitigating the risk of any kind of severe recession while still encouraging people to save, thus leading to a more stable economy in the long run. And besides, constant deflation could not be any worse than constant inflation just with opposite symptoms, though those of constant deflation being less harmful overall.

 

[Machjo]

Personally I'd like to see everything, prices, wages divided by 10 to bring things back to some semblance of normal.

That's not deflation though. Technically, that's currency exchange. The Weimar republic had done that when they'd replaced the old currency with the new one, with the new one being worth x times the old one, and of course with a different design on the note so that they could be distinguished from one another.

That would not necessarily be a bad thing though, and is necessary from time to time in an ever inflating environment since sooner or later, as you say, we end up needing to carry just way too much cash on us all the time.

 

[Machjo]

I would say however that I would not be in favour of going through the trouble of adopting a new currency until we finally put an end to constant inflation otherwise we'd end up having to repeat the whole process again sooner or later with the new currency too. If we could put an end to permanent inflation first and then switch to the new currency, then we could be sure not to have ot repeat he whole process again.

 

[JLM]

I would say however that I would not be in favour of going through the trouble of adopting a new currency until we finally put an end to constant inflation otherwise we'd end up having to repeat the whole process again sooner or later with the new currency too. If we could put an end to permanent inflation first and then switch to the new currency, then we could be sure not to have ot repeat he whole process again.

I doubt if we'll see any drastic changes either way until the human animal manages to overcome one of its main traits...........................GREED.

 

[Machjo]

As for the gold standard, there is an interesting privately led gold standard in place already in Indonesia:

Islamic gold dinar - Wikipedia, the free encyclopedia

This proves that the gold standard is feasible at lest on a small scale, though of course it's less certain that it would be on a large scale, but I think it would be worth exploring. You sure would not need to carry much money on you with such a standard in place. Even one dinar could buy you a heck of a lot, and it would not take much space in your wallet. Add to that that even if you stuffed it under your pillow for years, you know no one and no government could do much to devalue it.

 

[theconqueror]

What about hedging? Forgot the most popular choice...

 

[Machjo]

What about hedging? Forgot the most popular choice...

I don;t quite follow how that impacts on inflation though. Is this something the person does or the government? And what's it's long-term impact on inflation?

From what I understand, it merely stabilizes inter-currency exchanges but not necessarily inflation domestically. Am I missing something here?

 

[Avro]

Economists are the most boring and heartless people.....they only see numbers.

 

[Machjo]

Economists are the most boring and heartless people.....they only see numbers.

... that affect our money.

 

[Avro]

... that affect our money.

Still boring....and most times have no idea what they are doing....all theory.

Accountants are the same.:lol:

 

[Machjo]

Some of the theory is logical enough though. Do I need to prove to you, for example, that printing large sums of money and putting it into the economy will increase the risk of inflation?

Or will you be more motivated to save money you know will keep its value in the long term, or money that's always inflating? If it's always inflating, you're likely to hedge it, no?
Do we need scientific proof of that?

 

[theconqueror]

I don;t quite follow how that impacts on inflation though. Is this something the person does or the government? And what's it's long-term impact on inflation?

From what I understand, it merely stabilizes inter-currency exchanges but not necessarily inflation domestically. Am I missing something here?

Here read some...

As parity beckons, firms rush to hedge:
As parity beckons, firms rush to hedge - The Globe and Mail


More Canadians may end up hedging more:
Parity?s no picnic

 

[JLM]

Some of the theory is logical enough though. Do I need to prove to you, for example, that printing large sums of money and putting it into the economy will increase the risk of inflation?

Or will you be more motivated to save money you know will keep its value in the long term, or money that's always inflating? If it's always inflating, you're likely to hedge it, no?
Do we need scientific proof of that?

I never did really understand the term hedging and hedge funds. Isn't that what we are doing when we diversify our investments, like equities, bonds and fix income accounts? Or do some people just have to complicate things through fancy jargon?

 

[Tonington]

Is there something wrong with the current target of two per cent? If it isn't broke...

 

[Machjo]

That's what I thought, it's more individual action. The government cannot do much with regards to the CAD's USD exchange rate. Let us hedge.

What I'm thinking more about here is what actually is within the government's power, at least to a degree, and that is in preserving the value of the CAD domestically.

Again, while I think it wise for the private sector to hedge here, I honestly don't see what the government can do about that. Or did I miss anything again? The article does seem to be dealing with individual action, not governmental action.

 

[Machjo]

I never did really understand the term hedging and hedge funds. Isn't that what we are doing when we diversify our investments, like equities, bonds and fix income accounts? Or do some people just have to complicate things through fancy jargon?

Yes, hedging is all about diversifying risk or parking your money on something secure during a storm so as to protect it.

 

[Avro]

Some of the theory is logical enough though. Do I need to prove to you, for example, that printing large sums of money and putting it into the economy will increase the risk of inflation?

Or will you be more motivated to save money you know will keep its value in the long term, or money that's always inflating? If it's always inflating, you're likely to hedge it, no?
Do we need scientific proof of that?

Some?.....perhaps, but I managed to create a net worth of over a million on just a grade 10.

On top of that I have alot of fun.;-)