But raising nominal prices is economically useless if it is not the healthy inflation.
One could add 000 behind each prices number (thus 10 will be 10 000), something similar to denomination, but in the other diretion—thus nominal prices will grow 1000 times, but it will not affect economy.
“But raising nominal prices is economically useless” No, that’s not true. Raising nominal prices helps with sticky wages & debts. Failing to raise nominal prices causes recession, unemployment, and bankruptcies.
“the healthy inflation” That phrase doesn’t refer to anything. “Healthy” isn’t a modifier that applies to “inflation”. There is only one single thing: the change in the overall price level. There aren’t “healthy” and “non-healthy” versions of that one thing.
“One could add 000 behind each prices number” No, you’re likely thinking of a different hypothetical, something like an overnight currency devaluation. In those cases, wage and debt contracts are simultaneously converted from the “old peso” into the “new peso”. That’s a very, very different macroeconomic event. “Printing money”, on the other hand, changes the prices of goods … but sticky wage and debt contracts are unaffected (and thus devalued). It is exactly the fact that only some but not all prices are changed by central bank money printing, that causes “raising nominal prices” to have an effect on the real economy. (Exactly as you suggest, if all prices changed simultaneously, the real economy would be unaffected. It’s important to understand that central bank money printing is very different.)
I mean by the “health level of inflation” the level of inflation which is benefitial to the economy without destoying belief in your currency, or creating an assets bubbles. As I explained in another comment below, printing money destoys contracts as people start to rewrite these contracts in a harder currency, as it happened in Russia during money printing experiments. The contracts were rewritten in dollars, exactly because russian central bank could not print dollars. As a result, the central bank lost the ability to affect inflation in dollars contracts. It had to pay a lot later to return the people beilef in russian ruble, by constntly manipulating currency rate.
Nominal GDP also increases by 1000 times, and everyone’s currency savings increases by 1k-fold, but the things which are explictly in nominal currency rather than in notes will keep the same number. The effect would be to destroy people who plan on using payments from debtors to cover future expenses, in the same way they would as if their debtors defaulted and paid only one part in a thousand of the debt, but without any default occuring.
But raising nominal prices is economically useless if it is not the healthy inflation.
One could add 000 behind each prices number (thus 10 will be 10 000), something similar to denomination, but in the other diretion—thus nominal prices will grow 1000 times, but it will not affect economy.
“But raising nominal prices is economically useless” No, that’s not true. Raising nominal prices helps with sticky wages & debts. Failing to raise nominal prices causes recession, unemployment, and bankruptcies.
“the healthy inflation” That phrase doesn’t refer to anything. “Healthy” isn’t a modifier that applies to “inflation”. There is only one single thing: the change in the overall price level. There aren’t “healthy” and “non-healthy” versions of that one thing.
“One could add 000 behind each prices number” No, you’re likely thinking of a different hypothetical, something like an overnight currency devaluation. In those cases, wage and debt contracts are simultaneously converted from the “old peso” into the “new peso”. That’s a very, very different macroeconomic event. “Printing money”, on the other hand, changes the prices of goods … but sticky wage and debt contracts are unaffected (and thus devalued). It is exactly the fact that only some but not all prices are changed by central bank money printing, that causes “raising nominal prices” to have an effect on the real economy. (Exactly as you suggest, if all prices changed simultaneously, the real economy would be unaffected. It’s important to understand that central bank money printing is very different.)
I mean by the “health level of inflation” the level of inflation which is benefitial to the economy without destoying belief in your currency, or creating an assets bubbles. As I explained in another comment below, printing money destoys contracts as people start to rewrite these contracts in a harder currency, as it happened in Russia during money printing experiments. The contracts were rewritten in dollars, exactly because russian central bank could not print dollars. As a result, the central bank lost the ability to affect inflation in dollars contracts. It had to pay a lot later to return the people beilef in russian ruble, by constntly manipulating currency rate.
Nominal GDP also increases by 1000 times, and everyone’s currency savings increases by 1k-fold, but the things which are explictly in nominal currency rather than in notes will keep the same number. The effect would be to destroy people who plan on using payments from debtors to cover future expenses, in the same way they would as if their debtors defaulted and paid only one part in a thousand of the debt, but without any default occuring.
And is it good?