It’s a Goldilocks situation. Too much inflation leads to things like out of control price increases and a devaluing of a currency. For an example, Argentina is facing such a crisis. And it can get really bad. As the government tries to prop up the local currency, people end up avoiding it even more, because it’s just losing value so fast. On the other side of the coin, when growth goes negative, that can lead to high unemployment, stagnant or falling wages. This is a classic depression, and it’s never good for the average people.
For all the complaints about central banks and their interest rate fuckery, it’s one of the most effective controls central governments have on the economy as a whole. Turkiye was kind enough to run the counter-factual experiment and is now hoping to get inflation down to “only” 30% by the end of 2024. In a normal economy, you could probably produce diamonds with strategically placed charcoal and telling local economists that inflation may hit 30% next year. But, thanks to Erdogan’s desire to win another election, Turkiye is now hoping to get down to that number.
It’s all a balancing act. And raising and lowering of rates effects a lot of people in different ways. But,it’s going to be going on constantly as central banks try to keep inflation at a reasonable level, without causing economic contraction. And it also means reports on economic conditions which highlight where economists think an economy is going. Unfortunately, it also leads to journalists using those reports to write sensational articles. The economy effects everyone, and nothing drives clicks like fear.
It’s a Goldilocks situation. Too much inflation leads to things like out of control price increases and a devaluing of a currency. For an example, Argentina is facing such a crisis. And it can get really bad. As the government tries to prop up the local currency, people end up avoiding it even more, because it’s just losing value so fast. On the other side of the coin, when growth goes negative, that can lead to high unemployment, stagnant or falling wages. This is a classic depression, and it’s never good for the average people.
For all the complaints about central banks and their interest rate fuckery, it’s one of the most effective controls central governments have on the economy as a whole. Turkiye was kind enough to run the counter-factual experiment and is now hoping to get inflation down to “only” 30% by the end of 2024. In a normal economy, you could probably produce diamonds with strategically placed charcoal and telling local economists that inflation may hit 30% next year. But, thanks to Erdogan’s desire to win another election, Turkiye is now hoping to get down to that number.
It’s all a balancing act. And raising and lowering of rates effects a lot of people in different ways. But,it’s going to be going on constantly as central banks try to keep inflation at a reasonable level, without causing economic contraction. And it also means reports on economic conditions which highlight where economists think an economy is going. Unfortunately, it also leads to journalists using those reports to write sensational articles. The economy effects everyone, and nothing drives clicks like fear.