[PEN-L:36174] Iraqi inflation

["Devine, James" <jdevine@xxxxxxx>]

Title: Iraqi inflation

{was: RE: [PEN-L:36164] Re: RE: Re: Re: Re: Re: Basra uprising wishful thinking ?}

 my only source about the US dumping of currency is pen-l, so I may be blowing smoke. But any inflation will only affect Iraq (since it's only Iraqi dinars that are being dumped) and not Japan, etc. It seems that the inflation is part of the war, since rapidly rising prices and/or shortages disrupt an economy. The Iraqi dinar/US dollar exchange rate has been falling pretty steeply in recent years; this tactic only encourages such falls.

 It's not part of a big push, which would have to be organized by Iraq's government.

Jim

-----Original Message-----
From: soula avramidis
To: pen-l@xxxxxxxxxxxxxxxxxxx
Sent: 3/26/2003 8:58 PM
Subject: [PEN-L:36164] Re: RE: Re: Re: Re: Re: Basra uprising wishful thinking ?

there is nothing wrong with a bit of infaltion, it may be time for some,
given the choice between war and infaltion. japan, china, and soon the
US and the EU will be asking for ways to reflate their economies.

a big push approach would kick both production and consumption in
virtuous but inflationary circle.

 "Devine, James" <jdevine@xxxxxxx> wrote:

of course, won't simply dropping money on the country cause inflation
(or suppressed inflation, i.e., shortages, illegal markets, and unused
currency)? it seems like one of the few situations when Milton Friedman
is right... There isn't much chance that production can increase to
prevent price changes. In fact, war reduces supply.
 
BTW, I'm not sure that the money multiplier process works in the normal
way during war-time, since the banks are likely in crisis.
 

Jim Devine jdevine@xxxxxxx &  http://bellarmine.lmu.edu/~jdevine
<http://bellarmine.lmu.edu/~jdevine>