Monetary Regimes and Inflation
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Monetary Regimes and Inflation

History, Economic and Political Relationships, Second Edition

Peter Bernholz

Exploring the characteristics of inflations and comparing historical cases from Roman times up to the modern day, this book provides an in depth discussion of the subject. It analyses the high and moderate inflations caused by the inflationary bias of political systems and economic relationships, as well as the importance of different monetary regimes in containing them. The differences for the possible size of inflations among monetary regimes like metallic currencies, the gold standard and fiat paper money are discussed. It is shown that huge budget deficits of government have been responsible for all hyperinflations. This revised second edition debates whether a growth of the money supply exceeding that of real Gross Domestic Production is a necessary or sufficient reason for inflation and also includes a new concluding chapter, which explores the long-term tendencies to create, maintain and abolish inflation-stable monetary regimes. Moreover, the conditions for long-term inflation-stable monetary regimes in history are explored.
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Chapter 7: Ending mild or moderate inflations

Peter Bernholz


In this chapter we will try to answer the question how mild or moderate inflations can be ended, whereas in the next chapter the same question will be asked for high and hyperinflations. This separation into two chapters already suggests that the tasks to end these two types of inflation call for different answers (Ireland 1997, with comments by Blanchard 1997, and Sargent 1997). This is indeed the case. The reason lies in the fact that during high and hyperinflations the real stock of the national money has been strongly diminished, whereas this is not true for mild and moderate inflations, in which the real stock of money rises often even above the normal non-inflationary level. The effort, in many cases undertaken by monetary and fiscal authorities, sometimes with the support of international organisations, to end high inflations with the recipes adequate for moderate inflations has led several times to catastrophic consequences. We will return to this problem in the next chapter.

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