Four hundred and twentieth seventh chapter measures to solve
Well, Lu Mingzhi was obviously very happy when he mentioned the salary increase. With more money in his pocket, he can buy more things. Even an honest official like Lu Mingzhi is of course very happy, but the country is printing money at full capacity.
, When Liu Lang heard about this, his head went crazy.
“Wouldn’t printing money cause inflation even more?”
Liu Lang felt that his head was a bit big.
"Grandpa Lu, what is inflation?"
Liu Lang asked.
"That means prices are growing too fast, and people's incomes can't keep up with the price growth!"
Lu Mingzhi also had little understanding of inflation.
"Well, that's what it looks like. In fact, the basic reason for inflation is that demand exceeds supply. People want more things, but there are no such things in the market. Then these items on the market are rare commodities, and of course the prices will increase."
"Well, Liu Lang, I understand when you say this. Yes, the country's economy is indeed getting better and better after the reform and opening up, but there has never been much improvement in product manufacturing. The key lies in the country's insufficient production capacity!
"
Lu Mingzhi nodded.
"Yes! You must know that there are very few plastic products in the country now, and the cultivation of grain is obviously not enough. The supply of pork and chicken is also insufficient. In short, there are many problems. The root cause is that our productivity is not good. Many grain cultivation is even in a state of decline.
In the stage of agricultural society! Of course, these problems cannot be solved in a short time. Now the country has serious inflation. Although we cannot fundamentally solve it, there are some problems that can still be solved!"
"Oh, Liu Lang, how to solve it?"
Lu Mingzhi knew that the country now attaches great importance to the currency issue. Prime Minister Zhao Hongyang directly took the lead in establishing a resolution group. The heads of all ministries and commissions are members. Large-scale printing of banknotes is only one measure. Other measures are also in progress. This resolution group was established.
There were many people who wanted to bring Liu Lang in. In their view, Liu Lang
The most powerful skill of this "first non-staff think tank" is not in machinery and computers, but in economics. However, Liu Lang has been running around these days, and even went to the suburbs of Shanghai and never came back, so everyone also
I didn't have the nerve to harass him. Now that Lu Mingzhi was the first to see Liu Lang, he immediately asked him what he thought.
"Since inflation means demand exceeds supply, the first thing to do is to control demand. Generally speaking, there are several methods. The first is to implement tightening policies.
Inflation is mainly controlled by cutting fiscal expenditures and increasing taxes. The purpose of cutting fiscal expenditures is to reduce government demand by limiting expenditures, thereby reducing aggregate demand. The main measures are to reduce national infrastructure and investment expenditures and limit public utilities.
Investment, cutting expenditures of various government departments, reducing social welfare expenditures, etc. Increasing taxes mainly increases the taxes of enterprises and individuals. After tax increases, the income of enterprises and individuals decreases, thereby reducing the level of investment and consumption."
Lu Mingzhi frowned after hearing this.
"If this is the case, then aren't the people happy for nothing?"
What Liu Lang said is indeed reasonable, but now the country is experiencing rapid economic growth. If income is reduced, the people will definitely be unhappy.
"This is one way. The second way is tightening monetary policy. The direct cause of inflation is excessive money supply. Therefore, to reduce the inflation rate, the central bank can achieve this by reducing the money supply in circulation.
Specific measures include: selling government bonds through open market operations, withdrawing currency, and reducing the stock in the economic system; raising interest rates will encourage people to use more money for savings, thereby reducing consumer demand,"
Liu Lang continued.
"What? Reduce currency? Then aren't we doing exactly the opposite now?"
Lu Mingzhi jumped up immediately.
"Not only is it done backwards, but in fact if it is done this way, the increase in bank interest rates will increase the cost of investment. For example, if the bank interest rate reaches 20%, you must know that the return rate of doing business can reach 20%.
It’s not low anymore. Now that banks can let you make such huge profits just by sitting down, who will invest in companies? So doing so also has a disincentive effect on investment.”
Liu Lang continued.
"Yes! If this were the case, I'm afraid many owners of private companies would stop doing business!"
Lu Mingzhi also figured it out.
"Then what do we do?"
Lu Mingzhi is a little anxious now. How can raising wages for the people also lead to faster inflation? Isn't this adding insult to injury!
"Don't worry, there is a third solution, which is to use policy means to increase supply. The cause of inflation is that the total demand of society is greater than the total supply. Increasing the total supply is the key. Even if our productivity is not enough,
If everyone is motivated to produce and allows them to produce more and work more, then the productivity impact will be greatly eased.
The main shortcomings are that the state uses tax cuts to improve workers’ willingness to work and labor productivity, which in turn increases companies’ desire to invest, thus driving an increase in total supply; secondly, it reduces government restrictions on companies and allows companies to free their hands.
Better expand the supply of goods; at the same time encourage enterprises to adopt new technologies, update equipment and adjust industrial structure."
Liu Lang proposed a third measure.
"This is a good idea!"
After listening to Liu Lang's explanation, Lu Mingzhi suddenly realized.
"Liu Lang, you are well-deserved for your title as the "Number One Non-Staff Think Tank". When I attended the meeting above, many people proposed plans, but compared with yours, their plans are... really not as good as yours."
ah!"
Of course they can't compare to Liu Lang. Liu Lang did a very detailed study on the inflation in the 1980s. In addition, many experts later wrote articles to discuss the far-reaching currency.
Analyzing how to avoid things happening, Liu Lang kept these suggestions firmly in mind.
The root cause of the inflation in the 1980s was naturally the lack of goods and the mistakes of some national policies. This is not surprising. China has been in a stable market environment for so many years. In the past, these things were all caused by capitalist society.
Where has China ever encountered such things? So when inflation came, the senior officials were at a loss. As inflation continued to intensify, they became even more confused. As a result, huge losses were caused to the country, especially to those in the middle class.
Low-income people are the biggest victims of this currency.
But then again, everyone used to be poor, and many families could not afford to wear trousers. Often the older brother or older sister would wear a pair of trousers first, followed by the second younger brother and the third younger sister. These trousers could become "family heirlooms."
It stands to reason that the lives of ordinary people in this era are even poorer than when inflation came, but why don't ordinary people in this era have many complaints?
The fundamental reason is the imbalance in the hearts of the people. They see that many people have gained huge wealth without working hard, but they have lost their wealth through hard work. When this happens, not to mention ordinary people, even Liu Lang
Will scold my mother.
Therefore, in order to solve the biggest inflation since the founding of the People's Republic of China, in addition to the country's correct policies, we must also make the people feel fair and valuable.