Re: Printing Money

[Bruce McFarling <brmcf@xxxxxxxxxxxxxx>]

On Sun, 26 Feb 1995 FAC_BROSSER@xxxxxxxxxxxxxxxx wrote:

> To Lynn Turgeon:
> ...
>      I do however think some hyperinflations have been
> tied to hypermoney creation, although the question still
> may be that that reflects more fundamental forces.  In
> general in LDC's or economies without "sophisticated"
> financial sectors, it takes the classic form of literally
> printing money.  Thus at the height of the 1985 Bolivian
> hyperinflation, paper money was the nation's third largest
> import, their money being printed in Germany (how appropriate).
> Barkley Rosser
> James Madison University
>
	This does brush by the hard currency / soft currency
distinction without even nodding hello, doesn't it?  For
countries that must import productive equipment and other
material production inputs, as opposed to trading these as
most OECD's do, policies that boost local incomes without
realizing increased export earnings lead to a hard
currency crunch, and either hard currency controls,
which constraint supply expansion to accomodate the
income expansion, or devaluation, which inflates the
cost of imported resources used in production.  In either
event, where the local currency is accepted less and less
a money, in favor of the hard currency, the government can
get into a hyperinflationary spiral trying to maintain
the purchasing power of the government budget.  And,
even though Weimer Germany was not exactly an LDC of the
day, reperations ensured that the German currency would
be a soft currency: as Keynes had forssen in _Economic
Consequences of the Peace_ (aha! you thought I would
refrain from bringing up Keynes on pkt, but as
contraversial as it may be, I'll probably persist doing
so 8-)#  )

Virtually,

Bruce McFarling, Knoxville
brmcf@xxxxxxxxxxxxxx