Anti-inflation weapon competition

Source: Internet
Author: User
Keywords Inflation
Tags address anti- cash payments consumption credit direct help it is
The advantage of interest rate hike: to the bank, can effectively shrink the liquidity of capital, while slowing the effect of negative interest rates, can also be appropriate for excessive credit to have a deterrent effect; for savers, they can curb consumption and investment, increase savings, compensate for the value of their wealth, and thus prevent social unrest.  Downside: It is likely to lead to large inflows of foreign capital and not to fundamentally address inflation and the rise in the price of money.  Subsidies include various forms of subsidies, such as food subsidies, electricity subsidies, fuel subsidies, and even direct cash payments to the public.  Advantages: For the government, the government will be able to avoid more painful policies, such as a substantial increase in interest rates, which will benefit the public immediately, solve the immediate problems, help the low-income families, help consumers cope with higher prices, and temporarily prevent inflation from further aggravating. Disadvantages: can only be expedient, in the long run, some subsidies are unsustainable, and they may encourage consumers to spend, thereby further pushing up prices; at the same time, price controls prevent farmers and producers from producing more food and other products that could cause other distortions by forcing them to expand production,  would have counterproductive effects.  Issuing debt to inflation-linked bonds, each year to the bond-buying public to distribute inflation-linked interest to ensure that the bond is not eroded by inflation, the biggest feature is that its principal can rise with inflation.  Advantages: The technical operation is simple and feasible.  Disadvantages: The benchmark for interest rates and inflation is difficult to determine, and the inflation benchmark against inflation bonds may not reflect real price levels.  The advantages of reducing taxes: raising the tax base of individual income tax, reducing the burden of tax and expense of the working class, ensuring that the overall tax burden of ordinary people do not increase, can curb inflation to some extent.  Disadvantage: Because the effect of tax policy is slow, it often misses the timing of inflation control, so it is rarely used alone in practice.  Improving supply, speeding up the adjustment of industrial structure, cultivating the growth point of emerging industries is a fundamental way to change the mode of economic development and to relieve the inflationary pressure. Subsidize loans to major producers to help them grow to keep pace with rapidly growing economic needs. Advantages: In the long run, these actions are most effective in tackling inflation.
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