1. Deflation would increase the value of outward Foreign Direct Investment(FDI). Increasing spending counters deflation. Would increasing outward FDI ward off the worst parts of deflation yet keep the positive parts?

  2. In a deflationary economy would I be able to print money to pay off government debt?



1 Answer 1

  1. Deflation would u̶n̶i̶t̶a̶r̶i̶l̶y̶ ̶b̶e̶t̶w̶e̶e̶n̶ ̶a̶n̶d̶ stably and marginally increase velocity of physical resource consumption and productivity, but the nominal rate will fall to real growth, which is not necessarily variable across income, non-charitable trust, nor good will percentiles, which is worse for an efficient terms of trade, to boot. Competitive deflation is substitutive, which is fine, but technical deflation is "good" for benefactor outcomes, utility.

[T]he relative difference in per capita income between the rural and urban populations does not necessarily drift downward in the process of economic growth: indeed, there is some evidence to suggest that it is stable at best, and tends to widen because per capita productivity in urban pursuits increases more rapidly than in agriculture. If this is so, inequality in the total income distribution should increase [with urbanization]. (Simon Kuznets, Economic Growth and Income Inequality, Part I: An Attempt at Explanation, 1955)

The Phillips curve and the Kuznets curve measures price for income as either inflation for unemployment or inequality for income, yet only match when equality rises with income as unemployment makes for less inflation, and promises to be deflation if investment consumption, after the inflation of urbanization trickles up.

As technology and economic performance rise to higher levels [as a value added share], incomes are less subject to transient disturbances, not necessarily of the cyclical order that can be recognized and allowed for by reference to business cycle chronology, but of a more irregular type. (Simon Kuznets, op. cit., Part I: Trends in Income Inequality)

The terms of trade are always a benefactor like real income equalization.

[I]f country B can produce goods, previously produced in A, [A's money earnings] might, in conceivable circumstances, actually rise as a result of the increased attractiveness of kinds of investment in A, which can only be efficiently supplied by factors of production in B. ...[T]he amount of the alteration in the terms of trade between A and B, due to the increased attractiveness of investment in A, is independent of the character of the transition and of the means by which it is brought about. It depends on non-monetary factors—on physical facts and capacities, and on the elasticities of demand in each of the two countries for goods which the other can produce with physical efficiency. (John Maynard Keynes, A Treatise on Money, The Pure Theory of Money, Chapter 21: Changes Due to Disequilibrium, Part II: The Relationships Between Foreign Lending and Movements of Gold, p. 300-301, 1930)

Thus the natural rate of interest is the rate at which saving and the value of investment are exactly balanced, so that the price level of output as a whole (II) exactly corresponds to the money rate of the efficiency earnings of the factors of production. Every departure of the market rate from the natural rate tends, on the other hand, to set up a disturbance of the price level by causing the second term of the second fundamental equation to depart from zero. (John Maynard Keynes, op. cit., The Conditions of International Equilibrium, Part II: The Rate of Interest, or Bank Rate, p. 139)

So long as entrepreneurs are enjoying windfall profits (or losses), the position is unstable. If it is a case of profits, they bid against one another for the services of the factors of production, until the latter have risen to a level at which costs of production and sale proceeds are again equal. If it is a case of losses, they throw factors of production out of employment until the latter agree to accept a rate of remuneration at which the costs of production no longer exceed the sale proceeds. (John Maynard Keynes, op. cit., Chapter 17: Changes Due to Monetary Factors, Part III: The Problems of the Transition, p. 241-242)

  1. A central bank only splits treasury stock to pay a debt service (i.e. at about $400 billion per year in the U.S.) before the outstanding cashes in for par.

Thus there can be no real breach in the continuity of descent in the pedigree of the money of account, except by a catastrophe in which all existing contracts are simultaneously wiped out. (John Maynard Keynes, op. cit., Chapter 1: The Classification of Money, Part I: Money and Money of Account, p. 5)


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