This is how inflation is fought
Inflation is the “disease” of the currency that affects any country. Assuming that we all know what it is and why it causes a generalized rise in prices, the question arises: what to do? The answer could be effect by referring our interest to the many books on economics that are in circulation and which focus on this drift monetary. Well, then let’s move on to the question: who loses? In general, everyone is a bit, but some categories suffer much more than others, such as those who live on a salary, for example. In the 1970s, the “escalator”, i.e. the automatic adjustment of salaries, was tested, with serious damage both for the state coffers and for the employees who from month to month found themselves spending more and more to buy the same things. Fortunately this economic-financial opprobrium it was abolished, to then see the currency return to the channel of financial moderation.
Today, for a variety of reasons, we have inflation (domestic and imported) which makes us think about what remedies to oppose to a possible further growth. Question: Do you have half an idea how to solve the problem? Maybe yes. Years ago I had to suggest that by increasing the monetary circulation it was possible to think of remedying even a “galloping” inflation, of course I have never seen evidence in this sense and therefore here is the opportunity to propose it again. All the salaries (excluding those related to institutions) are generally paid on the 10th of each month (private employees are around 15.7 million), question why don’t we make them weekly instead of monthly? It could be argued that companies are already struggling to get credit let alone if the banks are willing to finance them to advance salaries. And yet, there is a solution, without inconveniencing the banks, rather having them as an ally. Meaning what? It is sufficient for the company to have a credit card, with which the amount spent in the previous month is debited on the 15th of the following month And that’s it.
Remember that: credit cards are not a means of payment, but of deferment of payment and do not contribute to forming the monetary mass! The company can thus advance salaries to bring them to the weekly payment and at the same time it does not need funding, ergo for employees it is cash, for companies it is a deferred payment. Simple isn’t it? Last question: is it possible to reduce inflation in this way? Well, I won’t be the one to answer, but Irving Fisher (1867-1947) with his equation. The exact equation is: 1 + rr = (1 + rn)/(1 + π). Taking rr as the real interest rate, rn as the nominal interest rate and π as the expected inflation rate, we get: rn = rr + π. Thanks to this equation it is possible to carry out an ex ante analysis, i.e. before, and ex post, i.e. after. That said, all we have to do is wait for the situation to evolve, assuming and granted that companies adopt this simple method.
Subscribe to the newsletter
