The growth of money mass is preceded by price increases. Effect of money supply increase

31.03.2021

By ensuring the real increase in money supply, you can achieve the growth rates of GDP to 10% per year or more. That was how it was, for example, in 2000, when GDP growth in Russia was higher than even in China. And to combat inflation, it is necessary to apply not a reduction in money supply, but a very effective tool - the creation of "long money".

Inflation due to expensive oil or grief from the mind

At once, two experts in March 2015 expressed that in the 2000s, oil revenues were made to achieving low inflation. One of them Alexey Kudrin, Ex-Minister of Finance and Ex-Deputy Prime Minister. On March 18, during a press breakfast, in the framework of the Russian business week, RSPP, he said that "to ensure the growth of inflation for the year at the level of 3-4% is easy when the oil and gas income is falling, which are a driver of demand in the economy" (Kudrin, 2015).

TASS quote: "Our inflation will still be historically low sometime - 3-4%. In general, 3-4% is not so difficult to ensure. It was not provided earlier, because we had a pressure of oil and gas revenues that they wanted to spend. The Central Bank redeemed them in reserves. The entire growth schedule of gold reserves means at the same time an increase in the monetary base in the economy and the money supply, accordingly. " According to Kudrin, during certain years, the increase in the money supply was at the level of 50%. "Accordingly, the demand increased, not allowing to reduce inflation," said Ex-Minister of Finance (Kudrin, 2015). Pay attention, according to Kudrina, inflation problems - from growing demand.

There was an idea about the impact of additional monetary emission on inflation and earlier, in some articles Kudrin, dated 2006 2006. We quote: "Conducting economic policies in countries, largely dependent on the export of oil and other non-renewable resources is complicated by a number of fundamental problems. First, in these countries there are effects associated with the so-called "Dutch disease". The large surplus on the current balance of payments account has its consequence to increase the nominal exchange rate of national currencies, resulting in the competitiveness of the economy. Attempts to slow down the growth rates of this course lead to an increase in the volume of gold and foreign exchange reserves and, therefore, to an additional monetary emission, much more than the needs of the economy. As a result, the monetary system becomes unbalanced, inflation is accelerated, growing real effective course of national currency "(Kudrin, 2006)

Another expert who spoke on the same topic is Dmitry Tulin, the new deputy head of the Central Bank of Russia, who replaced Ksenia Yudaev as a curator of the monetary policy of the Central Bank. In his interview with the agency, Reuters on March 5, Tulin practically repeated the thought of Kudrin, saying that in the era of the influx of petrodollars (quotation) "Rising reserves - through the purchase of currency by the Central Bank - was the main source of money growth. And we suffered because it [the money supply] grew higher rates than I wanted, and the rates of inflation were higher than I would like, [there was] the so-called Dutch disease "(TULIN, 2015).

Let's call the "hypothesis A" of the assumption of Kudrin (and Tulin) on the presence of inflation dependence in Russia from the growth of the money supply. The logical relationship of the phenomena set forth in this hypothesis is reflected in table 1. .

Table 1. "Hypothesis A". Logical interconnection of phenomena.

The first four links of reasoning are no doubt "Strengthening the ruble - the accumulation of reserves - the growth of the monetary base is the growth of money supply" - all this is obviously confirmed by the facts. Only the final conclusion about the growth of inflation slightly "lame". Inflation still decreased. In addition, in March 2007, it descended to 7.5% in annual terms. That is, Alexey Kudrin's thesis on the "acceleration" of inflation is somewhat dubious. But it must be recognized that inflation most of the time remained above 10% of the level.

From the "hypothesis A" follows the paradoxical conclusion: low oil prices are good for Russia! At a minimum, they are good in that they will help achieve low inflation values. This is directly followed by Kudrin's statement: "Provide a 3-4 percent increase in inflation for the year is easy when the oil and gas income is falling, which are the driver's driver [read, inflation] in the economy."

Is such a "misfortune", as a fall in oil prices, entails "happiness" of low inflation, as in popular expression "there would be no happiness, and the misfortune helped"? Intuition suggests: something is wrong here. To understand this paradox, it is necessary to check its "original source", that is, "hypothesis A".

Kudrin hypothesis is not confirmed

A simple check shows that in the logical reasoning Kudrin is incorrectly only the last (but the most important) provision that suggests that inflation is accelerated due to the growth of the money supply.

We will see data on the growth of such indicators as a money supply, monetary base and inflation ( schedule 1. )

Schedule 1. According to Alexei Kudrin, inflation in Russia did not fall to 3-4% in 2000-2007 due to the fact that the increase in the money supply was very large and "reached 50% in certain years" due to the "head of oil and gas income".

Source: Rosstat, Central Bank

Similar data (for 1999-2005) leads to their article Alexey Kudrin (2006, Table 1).

The schedule confirms only Kudrin's words that the increase in the money supply in some years was at the level of 50% (this is 1999, 2000, 2003, 2006). However, these data does not confirm Kudrin hypothesis, and contradict her. For example, the acceleration of up to 50% of the increase in the money supply in 2003 led not to the acceleration of inflation, but to its decrease. The situation was observed in 2006. Thus, serious doubts arise in the justice of "hypothesis A":

First, in certain periods of highly stormy growth of the money supply (1999-2000; 2001-2003; 2004-2006), inflation (contrary to the logic of "hypothesis A") decreased faster than the usual.
Secondly, this is the main question, why at such a high rate of increment of the monetary base and money supply (from 22% to 70%) inflation did not accelerate to higher values, did not strive for the growth rates of the money supply, but on the contrary, it was steadily declined almost all the time?

If you see the data for a longer period of time, 1997-2014 ( chart 2. ), You can see other phenomena that are completely contrary to the logic of Kudrin, for example, inflation bursts against the background of reduced money supply.

Chart 2. Contrary to the logic of Kudrin, inflation growth in 1998, 2008, 2014 occurred against the background of a decrease in the growth rate of the money supply in previous years. Conversely, increasing the money supply during periods 1998-2000, 2008-2010, led to a decrease in inflation.

Source: Rosstat, Central Bank

A decrease in the growth rate of a monetary proposal has led to inflation growth in some cases (1998, 2008, 2014). Conversely, during periods, when the growth rates of the money supply increased (1998-2000; 2001-2003; 2004-2006; 2008-2010) - inflation decreased by an accelerated pace.

An attempt to find a mathematical dependence of inflation on the increase in money supply does not give a positive result ( schedule 3. ).

Graph 3. Kudrin hypothesis is not confirmed. Inflation is very weak dependent on the increase in money supply. An even less dependence of inflation from the increase in money supply in the previous year.

Source: Rosstat, Central Bank. Each point corresponds to one year. Data for 1997-2014.

The relationship of the indicators is very weak or absent. Take a look at the top of the graph 3.

And the maximum inflation (1998 is 84%) and minimum inflation (2011 - 6.1%) were observed with almost the same amount of money supply by 21-22%.
Conversely, the same inflation rate of 9-11% is observed at the rate of money supply less than 5% and at rates about 50%.
If you spend a mental line between points 1998-1999-2000, it can be seen how the decrease in inflation occurs against the background of a sharp growth (and not reduction) of the money supply.

The formal statistical approach confirms this (R 2, almost equal to zero speaks of many). The relationship of indicators does not mean that it is the cause, and as a consequence. Causal relationships between the growth of money supply and inflation are not obvious. But even if we assume that inflation, in accordance with the "hypothesis A", depends on the increase in money supply, the dependence formula built by the usual means Excel (listed on the chart) says that the increase in money supply by 10% leads to an increase in inflation Just 0.84% \u200b\u200b(see the top of the graph 3). The idea that inflation more depends on the increase in the money supply in the previous year is also not confirmed - the dependence is even weaker (lower part of the graph 3).

The results of finding the relationship between inflation and the monetary base (instead of mass) give a similar result - the relationship is very insignificant. Elimination of the so-called. "Statistical emissions" also does not change the picture: inflation in the range of 7-15% happens with almost a zero increase in the money supply, and when it increases at 50%.

Inflation is accelerated due to the growth of money supply, asserts Kudrin. But this is not confirmed by the facts. Or can be the opposite so that inflation is accelerated due to the fall of the money supply? Yes, this happens during each crisis in Russia. And there is quite a logical explanation why this happens (see Blinkers, 2015)

Let's bring a short intermediate result.

The first: attempts to find the relationship between the growth rates of money supply and inflation for the period 1997-2014 do not give results. "Kudrin hypothesis" is not confirmed by facts.
Second: most of the time the increase in money supply is significantly (at times!) The inflation rate exceeded. It is necessary to understand where this money "went", since they practically did not lead to price increases?

Demand gives birth proposal, not inflation

It turns out that the increase in the money supply "intended" is not at all for the promotion of inflation, it has a completely different (and very important!) Mission - GDP growth.

Above, we found out that a significant part of the growth of money did not cause inflation growth. But the question arises - what did these additional money "spent" then?

First, we define what the term is more convenient to designate this value. If the rate of price increases from the rate of increase in the growth rate of the money supply, then we do not get anything other than the real increase in money. What "spent" the real increase in the money supply to us and will deal with ( graph 4. ).

Graph 4. It is necessary to find out what the real increase in the money supply (31%) in 2007 and other similar years have been consumed. (2007 taken for example. The same situation was in 1999-2008 and 2010-2013)

Source: Rosstat, Central Bank; * - calculated on the simplified formula

We give an example on the household level using the same numbers. Suppose for the year prices rose by 12%, and pensions increased by 43%. Any pensioner is clear that from these 43% of the increase of 10% 1 "left" to compensate for the increase in prices. And only for the remaining 31% really growing consumption of goods and services. This real increase in consumption means that this magnitude has grown demand from the pensioner, and after in demand Rose of and volume of products and services produced.

To understand how much the demand is assumed by Alexey Kudrin, we will conduct a "linguistic" express analysis of his statements about inflation (they have already been given above).

"To ensure the growth of inflation for the year at the level of 3-4% is easy to fall in oil and gas income that the driver is demand in economics". That is, the demand, in this phrase Kudrin, causes inflation, and in this case even almost synonymous inflation.
Another quote from the same source: "Accordingly, increased demand , not allowing to reduce inflation. "

Note that the demand, in the calculations of Kudrin, causes inflation. That is, the driver, the propeller of inflation was not even a monetary mass (which could still be understood), namely the demand. This contradicts the known expression "The demand gives birth to a sentence", which is attributed to the outstanding economist John Mainiard Keynes. Who is in this case rights, Kudrin or Keynes?

If we believe Keynes, then the answer to our question is what the real increase in money supply "was consumed" - it should be very simple. The real increase in the money supply "worked" on GDP growth. As in our example with a pensioner, an increase in the amount of money in the economy could not unwind inflation, but to create a new demand. As a result, the production of goods and services could grow to meet this demand. All exactly according to the formula "Demand gives birth to an offer." Accordingly, GDP should grow.

The assumption just made us can be formulated as a hypothesis: "The growth of real money supply leads to GDP growth". Let's call it "Hypothesis b". To test this hypothesis, it is necessary to compare the real increase in money supply and the increase in GDP for the corresponding period, which we will do in table 2. .

Table 2. Dynamics of money supply, inflation and GDP increase in 18 years (1997-2014).

Sources: Rosstat, Central Bank. * Calculated on the simplified formula.

If you submit the last two columns of Table 2 on the chart ( schedule 5. ), the synchronization of the dynamics of these two indicators is immediately striking.

Chart 5. The real increase in money supply * has very similar dynamics with GDP growth. Contrary to the hypothesis Kudrin, the growth of the money supply "spins" is not inflation, but the economy (GDP).

The "hypothesis b" is confirmed, but the graph shows some incomprehensions (points 1 and 2 at the bottom; the years 2008 and 2009 at the top), when the money supply falls, and the GDP is growing and vice versa. These discrepancies are easily explained by the dynamics of indicators within the year (quarterly, monthly). Consider these incisions.

Point 1, 2008. For example, in 2008, the monetary mass in real terms decreased (-12.5%, see Table 2), but GDP increased by 5.2% this year, contrary to our assumption (point 1 at the bottom of the graph 5) . This discrepancy is explained by the fact that during the three quarters of 2008, the increase in the money supply in annual terms was positive (+ 22%; + 11%; + 7%, respectively, in 1, 2 and 3 quarters), and only in the 4th quarter switched to The negative zone, which was recorded as the annual result of the increase in the money supply (-12.5%). In accurately compliance with the dynamics of the real money mass and GDP was conducted: according to Rosstat GDP GRP in the first three quarters of 2008 and fell only in 4 blocks. But the fall of GDP in one block could not affect the annual result, the GDP in 2008 increased by 5.2% (growth in quarters: + 9.2%; + 7.9%; + 6.4%; -1, 3%)

Point 2 - 2009. Similarly, the discrepancy between the dynamics of the real monetary mass and GDP of 2009 is explained. On the chart 5, this discrepancy is expressed in the negative growth of GDP against the background of the positive increase in the money supply (point 2 at the bottom of the graph 5). This is simply explained. During the 11 months of 2009, the increase in real money supply was negative (-22%; -18%; -16% in 1, 2 and 3, respectively) and only in December came into a positive zone, which was recorded as an annual result. But one month December could not affect the volume of GDP in 2009.

We combine these two cases. Speaking in a simple, giant reduction in the money supply in the 4th quarter of 2008 (and it happened due to the seizure of the Central Bank more than 5.5 trillion rubles during currency interventions), no longer "spoil" the 2008 GDP indicator, but has become more seriously influenced For the whole of 2009.

The above discrepancies can be eliminated by moving on annual values \u200b\u200bto a quarter. Producing a number of calculations (calculation of quarterly data, the calculation of the real money supply is not simplified, but according to the exact formula, the elimination of seasonality), we obtain data confirming the close relationship between GDP and the real money supply ( chart 6. )

Graph 6. There is a close relationship between the actual monetary mass M2 and GDP. A decrease in the growth rate of the real money supply in the last 8 quarters led to a decrease in GDP growth rates (red winding arrow).

Dynamics of indicators for the last 8 blocks (from 1 square. 2013 4 square meters. 2014), shown on the graph 6 with a red winding arrow, fully corresponds to the "hypothesis b" on the effect of the real money supply on GDP. The dependency equation is given on the chart and calculated automatically when building a trend line to Excel.

6 points on the chart are seriously deviated from the main array of points. Without going into details, we note that it is primarily due to the use of four-quarters of moving averages to eliminate seasonality. If you exclude from consideration mentioned above 6 points, as a kind of "statistical emission", then the remaining points of the chart (62 of 68) are laid in a much closer dependence ( schedule7. ).

Graph 7. Each time the actual money supply increases by 10%, this causes acceleration of GDP rates by about 3%. Conversely, the fall in the real money supply by 10% causes a decrease in GDP rates by 3%. The red line shows the actual value of the increase in the real money supply on March 1, 2015 (drop by 11%)

This dependence, in accordance with the "hypothesis b", can be understood simply: the change in the rate of growth of the real money supply by 10% leads to a change in the rate of GDP growth by 3% (from the coefficient of 0.3 before the variable x. in equation). "Hypothesis B" is confirmed.

The red line shows the actual dynamics of the real monetary mass on March 1, 2015 (-11%). The average value for the 4th quarter (used during the constructions of the diagram) has not fallen so much (-2%). But when maintaining the current policy, the Central Bank will strive to this area. As a result, the fall of GDP in 2-3 quarters will be from -2% to -8%.

GDP growth as a consequence of money growth

Of all the above, you can make two main outputs.

The conclusion is the first, theoretical: Since 1997, the economic history of Russia has confirmed that the growth of money supply leads to an increase in GDP and practically does not lead to an increase in inflation. In other words, the "hypothesis A" (or, if you want, Kudrin's hypothesis) is not confirmed, and the "hypothesis b" (set out in this article) is confirmed.

Conclusion of the second, practical: The "golden rule" of economic growth for the economic authorities, primarily the central bank, should be maintaining a sufficient growth rate of the real money supply. In other words, the growth rate of the nominal money supply should be higher than the level of inflation, it is in this case that GDP is possible.

The Golden Rule of Economic Growth: The growth rate of the nominal money supply should be higher than the level of inflation, it is in this case that GDP is possible.

The most interesting topic of the impact of the money supply on the growth of the economy could be continued.

It is possible to deepen in theoretical confirmation of the "hypothesis b" (the hypothesis is easy to derive mathematically of the known Fisher equation for the amount of money in circulation).
It is possible to provide a hypothesis confirming historical examples of how the economic recession after the "shock therapy" passed into economic growth immediately, as soon as the growth of the money mass began to exceed inflation, that is, the execution of the Golden Regulation began. So in Poland, "shock therapy" began at the end of 1989. But in 1990 and 1991, the monetary mass grew slower inflation, and it determined the fall of GDP; In 1992, the increase in the money supply began to be ahead of inflation and it was the first year of GDP growth after "shock therapy".
It is possible to give even more vivid examples, how "shock therapy" has not led to a decline, but to 7.4% GDP growth, because The "golden rule" was performed directly in the year of "shock therapy". So it was in Vietnam in 1989. Then there was a complete liberalization of prices and a course of the Vietnamese Dong ("Shock therapy"), but with a price increase of 75%, the money mass was increased by 213% (ie, more than 3 times ahead of inflation). The "golden rule" was made with the "stock". As a result of the fall of GDP when conducting "shock therapy" in Vietnam, there was no, on the contrary, GDP growth was 7.4%.
You can specify that the rule of maintaining the growth of the money supply is directly recorded in the very first rows Section "Monetary Policy Objectives" of the Legislative Act of the Federal Reserve: "The Board of the Fed and the Federal Open Market Committee must support the long-term increase in monetary and credit units ..." An example of a federal reserve, without exaggerating the most influential and advanced central bank in the world, may have to be used by the Bank of Russia.
It is possible to separately consider the question of why GDP growth by 5% "requires" the growth of the real money supply is not 5%, but for a greater amount, about 20% for Russia (one of the reasons - additional money requires an increase in investment, which practically does not affect consumer Prices; there are other, more fundamental reasons).

But all these questions are good for consideration in a separate article. We will now not be distracted for them, but consider two questions that are important from a practical point of view.

GDP growth by 10% not the limit

Formulating the first question and responding to it, we will see that the extension of the real money supply without failures is "transformed" into the growth of the economy at least 10% of GDP growth per year.

So, first question: to which upper limits, the extension of real money supply leads to GDP growth? In other words, we know that the growth of real money supply leads to GDP growth. But how long can it last? Are there 8% GDP growth rates in Russia, 10% or even higher, say 15%?

This issue is especially important for situations similar to the situation 2003-2008. After all, during these years, the injections of the money supply could be even more in the economy. Take a look again in Table 1. Buying hundreds of billions of dollars in reserves, the central bank emitted trillions of rubles, which ultimately increased the money supply.

But the money mass could grow even more! After all, one of the goals is not to give a ruble to strengthen - it was not achieved. From 32 rubles per dollar, ruble has been strengthened to 23 rubles per dollar in July 2008. What does it say about? This suggests that hundreds of billions of dollars could be redeemed by the Central Bank in reserves and three more trillions of rubles are added to the economy. Is it confident that the influx of this money and further contribute to GDP growth? Was it possible without concerns to increase the money supply even higher rates (for example, not 50% per year, and 80% or even 100%)?

This question (what "ceilings" of GDP growth due to the increase in real money supply exist?) It has a convincing, proven in practice Answer: Up to 10% of GDP growth does not arise any problems. Confirmation of the high growth rates of GDP in Russia in 2000, 2006, 2007 ( graph 8. ).

Graph 8. In 2000, Russia surpassed China in terms of GDP growth. High rates (more than 8%) were also observed in 2006 and 2007.

So in 2000, Russia with the rate of increment of GDP 10% is the only time in the latest history for this indicator surpassed even China. Let me remind you that the real monetary mass rose in 2000 by 61%, which remains a record indicator today (see chart 2 and Table 2). All as we assumed - an increase in the amount of money did not spoke inflation (it decreased in 2000 from 37% to 20%), but caused a record lifting of GDP.

High growth rates - more than 8% - were observed in 2006 and 2007, as well as in the first and second quarters of 2008 (9.2% and 7.9%, respectively).

So, the answer to the first question is: 10% GDP growth is far from the limit. Having achieved 10% of growth in the coming years, you can try to go out on higher rates. But now, when growth rates range about 0%, we can assume that in the near future, no restrictions for the "promotion" of GDP by increasing the real money supply..

Practical conclusion for the Central Bank: Any situation of strengthening the ruble in relation to foreign currencies, like the one that was in 2003-2008 can be used to increase GDP in Russia. The method of implementation is simple - to add ruble money supply to the economy (in terms of the strengthening of the ruble and the replenishment of gold and foreign exchange reserves).

This method is applicable right now. Everything has this:

the ruble is strengthened for several months;
ZVL does not interfere with the replenishment, because over the past year more than 100 billion dollars of gold and foreign exchange reserves are spent;
the actual money supply is reduced (as of March 1, 2015 - minus 11% in annual terms).

Moreover, it is possible to increase the money supply not only during the period of strengthening the ruble, but also during its weakening (and even contributing to this weakening). A good example is the same record 2000th year, because the extension of the money supply occurred against the background of weakening the ruble. So at the beginning of the year, the dollar cost 27 rubles, and at the end of the year - 28.2 rubles. And inflation? Inflation, I repeat, only decreased (from 37% to 20%).

How to deal with inflation by creating "long money"

Responding to the second question, we will understand that it is imperative to deal with inflation effectively not to a reduction in the money supply, but by creating "long money" (creating demand for money from the Central Bank and the Ministry of Finance).

So, second question: what still do with inflation?

Above, we realized that from inflation in a sense, you can abstract. After all, if important real The growth of money supply, whatever inflation, its consequences can be overcome. Just money must be added to the economy more than inflation "eaten". Inflation 10%? Well, we will increase the money mass by 30%. Inflation 17%? - There are no problems, increase the money mass by 37% (as wise Vietnamese, see above). There is nothing difficult for understanding here, it is according to this principle that pensions and benefits of unprotected segments occur (whatever inflation, it must be completely "indexed"; inflation is perceived as a given).

But the question of inflation still remains. In the end, the lower inflation, the easier it is to perform the "Gold Rule"! What is needed to bring inflation to 4% (long-term goal of the Central Bank) or even up to 2% (inflation targets in the United States and Europe)?

Above it was shown that inflation does not react to change the money supply (and sometimes reacts "on the contrary"). How can I cope with inflation?

Next, we will show that the tools to combat inflation from the government and the Central Bank are. But this is not done by reducing the money supply, and by increasing demand for money from the economic authorities. The essence of the idea: to restrain the extension of the money supply is not needed, especially during the years of good conditions. And to restore the balance of demand and supply in the money market is a proposal of special goods - the Bonds of the Ministry of Finance and the Central Bank.

To understand the idea, we take as an example of any year from the period 2003-2008. During these years, the ruble strengthening was not fully "winning". To hold the ruble from strengthening, it would still have to increase the monetary base, the money mass would grow after it. And according to the "hypothesis A" (Kudrin hypothesis), dominated at that time, inflation would have come out in this case due to control.

Consider 2007, simply because we have already considered it earlier on the chart 4. Almost the same schedule, but a slightly modified ( schedule 9. ) Shows the dotted line an additional increase in the money supply, which would have happened when the ruble ruble retention scenario from strengthening. It is impossible to calculate this amount. For the purposes of further presentation, the exact amount is not important, we will take it in 43%.

Graph 9. The retention of the ruble from strengthening in 2007 would require (in the process of additional increasing currency reserves) of an additional increase in the monetary base, and with it and the money supply.

To understand the diagram, you need to remember the ruble rate at the time. For 2007, the ruble strengthened from 26.3 to 24.5 rubles per dollar with an actual increase in the money supply by 43%.

To hold the ruble rate at the initial level (26.3), it would be necessary to additionally buy dollars in ZVL, thereby increasing the monetary base. And this would lead to the increase in the money supply to an additional 43% (arbitrarily selected value for example). They are shown as an area highlighted by a green touch on the chart. The overall increase in the money supply in this case would have already been 86%.

If the economy itself provides the production of goods and services to this additional amount (and this is about 4 trillion rubles), then the surge of inflation will not be. We noted that the Russian economy reacts very well to the growth of money supply and increases the proposal. That is, it is hoped that in our hypothetical case, the production of goods and services will grow by this amount, investments will grow.

But if the economy does not react to how economic authorities (Central Bank and the Ministry of Finance) will be able to intervene in what is happening? The answer is yes! They have the opportunity to offer "goods" practically on an unlimited amount depending on the situation, thereby regulating the level of inflation. This commodity is any obligations of the Ministry of Finance (GKO, OFZ) or the Central Bank (ORB - Bonds of the Bank of Russia). "Selling" on the market its obligations, Central Bank and the Ministry of Finance associate unnecessary money and quench the risk of inflation growth.

It is likely that record low inflation in 2011 was achieved, among other things, thanks to the active placement of bonds of the Bank of Russia (ORG), schedule 10. .

Graph 10. The placement of the ORP in the amount of almost one trillion rubles in the annual expression in 2010 contributed to record low inflation in 2011.

Alexey Kudrin believes that the growth of money supply in Russia leads to acceleration of inflation. Facts talk about something: the growth of money supply instead of inflation leads to ... GDP growth. By ensuring the real increase in money supply, you can achieve the growth rates of GDP to 10% per year or more. That was how it was, for example, in 2000, when GDP growth in Russia was higher than even in China. And to combat inflation, it is necessary to apply not a reduction in money supply, but a very effective tool - the creation of "long money".

Stanislav Dreeshnikov / Tass

Inflation due to expensive oil or grief from the mind

Table 1. "Hypothesis A". Logical interconnection of phenomena.

Kudrin hypothesis is not confirmed

We will see data on the growth of such indicators as a money supply, monetary base and inflation ( schedule 1. )

Source: Rosstat, Central Bank

Similar data (for 1999-2005) leads to their article Alexey Kudrin (2006, Table 1).

First, in certain periods of highly stormy growth of the money supply (1999-2000; 2001-2003; 2004-2006), inflation (contrary to the logic of "hypothesis A") decreased faster than the usual.
Secondly, this is the main question, why at such a high rate of increment of the monetary base and money supply (from 22% to 70%) inflation did not accelerate to higher values, did not strive for the growth rates of the money supply, but on the contrary, it was steadily declined almost all the time?

If you see the data for a longer period of time, 1997-2014 ( chart 2. ), You can see other phenomena that are completely contrary to the logic of Kudrin, for example, inflation bursts against the background of reduced money supply.

Source: Rosstat, Central Bank

An attempt to find a mathematical dependence of inflation on the increase in money supply does not give a positive result ( schedule 3. ).

Source: Rosstat, Central Bank. Each point corresponds to one year. Data for 1997-2014.

The relationship of the indicators is very weak or absent. Take a look at the top of the graph 3.

And the maximum inflation (1998 is 84%) and minimum inflation (2011 - 6.1%) were observed with almost the same amount of money supply by 21-22%.
Conversely, the same inflation rate of 9-11% is observed at the rate of money supply less than 5% and at rates about 50%.
If you spend a mental line between points 1998-1999-2000, it can be seen how the decrease in inflation occurs against the background of a sharp growth (and not reduction) of the money supply.

Let's bring a short intermediate result.

The first: attempts to find the relationship between the growth rates of money supply and inflation for the period 1997-2014 do not give results. "Kudrin hypothesis" is not confirmed by facts.
Second: most of the time the increase in money supply is significantly (at times!) The inflation rate exceeded. It is necessary to understand where this money "went", since they practically did not lead to price increases?

Demand gives birth proposal, not inflation

It turns out that the increase in the money supply "intended" is not at all for the promotion of inflation, it has a completely different (and very important!) Mission - GDP growth.

Above, we found out that a significant part of the growth of money did not cause inflation growth. But the question arises - what did these additional money "spent" then?

Source: Rosstat, Central Bank; * - calculated on the simplified formula

We give an example on the household level using the same numbers. Suppose for the year prices rose by 12%, and pensions increased by 43%. It is clear to any pensioner that from these 43% increase in 10% "left" to compensate for price increases. And only for the remaining 31% really growing consumption of goods and services. This real increase in consumption means that this magnitude has grown demand from the pensioner, and after in demand Rose of and volume of products and services produced.

To understand how much the demand is assumed by Alexey Kudrin, we will conduct a "linguistic" express analysis of his statements about inflation (they have already been given above).

"To ensure the growth of inflation for the year at the level of 3-4% is easy to fall in oil and gas income that the driver is demand in economics". That is, the demand, in this phrase Kudrin, causes inflation, and in this case even almost synonymous inflation.
Another quote from the same source: "Accordingly, increased demand , not allowing to reduce inflation. "

Table 2. Dynamics of money supply, inflation and GDP increase in 18 years (1997-2014).

Sources: Rosstat, Central Bank. * Calculated on the simplified formula.

If you submit the last two columns of Table 2 on the chart ( schedule 5. ), the synchronization of the dynamics of these two indicators is immediately striking.

GDP growth as a consequence of money growth

Of all the above, you can make two main outputs.

The most interesting topic of the impact of the money supply on the growth of the economy could be continued.

It is possible to deepen in theoretical confirmation of the "hypothesis b" (the hypothesis is easy to derive mathematically of the known Fisher equation for the amount of money in circulation).
It is possible to provide a hypothesis confirming historical examples of how the economic recession after the "shock therapy" passed into economic growth immediately, as soon as the growth of the money mass began to exceed inflation, that is, the execution of the Golden Regulation began. So in Poland, "shock therapy" began at the end of 1989. But in 1990 and 1991, the monetary mass grew slower inflation, and it determined the fall of GDP; In 1992, the increase in the money supply began to be ahead of inflation and it was the first year of GDP growth after "shock therapy".
It is possible to give even more vivid examples, how "shock therapy" has not led to a decline, but to 7.4% GDP growth, because The "golden rule" was performed directly in the year of "shock therapy". So it was in Vietnam in 1989. Then there was a complete liberalization of prices and a course of the Vietnamese Dong ("Shock therapy"), but with a price increase of 75%, the money mass was increased by 213% (ie, more than 3 times ahead of inflation). The "golden rule" was made with the "stock". As a result of the fall of GDP when conducting "shock therapy" in Vietnam, there was no, on the contrary, GDP growth was 7.4%.
You can specify that the rule of maintaining the growth of the money supply is directly recorded in the very first rows Section "Monetary Policy Objectives" of the Legislative Act of the Federal Reserve: "The Board of the Fed and the Federal Open Market Committee must support the long-term increase in monetary and credit units ..." An example of a federal reserve, without exaggerating the most influential and advanced central bank in the world, may have to be used by the Bank of Russia.
It is possible to separately consider the question of why GDP growth by 5% "requires" the growth of the real money supply is not 5%, but for a greater amount, about 20% for Russia (one of the reasons - additional money requires an increase in investment, which practically does not affect consumer Prices; there are other, more fundamental reasons).

But all these questions are good for consideration in a separate article. We will now not be distracted for them, but consider two questions that are important from a practical point of view.

GDP growth by 10% not the limit

So, first question: to which upper limits, the extension of real money supply leads to GDP growth? In other words, we know that the growth of real money supply leads to GDP growth. But how long can it last? Are there 8% GDP growth rates in Russia, 10% or even higher, say 15%?

Graph 8. In 2000, Russia surpassed China in terms of GDP growth. High rates (more than 8%) were also observed in 2006 and 2007.

High growth rates - more than 8% - were observed in 2006 and 2007, as well as in the first and second quarters of 2008 (9.2% and 7.9%, respectively).

This method is applicable right now. Everything has this:

the ruble is strengthened for several months;
ZVL does not interfere with the replenishment, because over the past year more than 100 billion dollars of gold and foreign exchange reserves are spent;
the actual money supply is reduced (as of March 1, 2015 - minus 11% in annual terms).

How to deal with inflation by creating "long money"

So, second question: what still do with inflation?

Above, we realized that from inflation in a sense, you can abstract. After all, if the real increase in money supply is important, whatever inflation, its consequences can be overcome. Just money must be added to the economy more than inflation "eaten". Inflation 10%? Well, we will increase the money mass by 30%. Inflation 17%? - There are no problems, increase the money mass by 37% (as wise Vietnamese, see above). There is nothing difficult for understanding here, it is according to this principle that pensions and benefits of unprotected segments occur (whatever inflation, it must be completely "indexed"; inflation is perceived as a given).

Above it was shown that inflation does not react to change the money supply (and sometimes reacts "on the contrary"). How can I cope with inflation?

Consider 2007, simply because we have already considered it earlier on the chart 4. Almost the same schedule, but a slightly modified ( schedule 9. ) Shows the dotted line an additional increase in the money supply, which would have happened when the ruble ruble retention scenario from strengthening. It is impossible to calculate this amount. For the purposes of further presentation, the exact amount is not important, we will take it in 43%.

To understand the diagram, you need to remember the ruble rate at the time. For 2007, the ruble strengthened from 26.3 to 24.5 rubles per dollar with an actual increase in the money supply by 43%.

It is likely that record low inflation in 2011 was achieved, among other things, thanks to the active placement of bonds of the Bank of Russia (ORG), schedule 10. .

Graph 10. The placement of the ORP in the amount of almost one trillion rubles in the annual expression in 2010 contributed to record low inflation in 2011.

The increase in the money supply is usually accompanied by an equilibrium shift, a decrease in the interest rate and an increase in demand for money. In response to this firms, increase the volume of the issue, respectively increase employment, wages and prices.
The process of fixture in this case occurs under pressure of costs in the economy with excessive employment. It will take place before restoring the initial volume of the release (with complete employment), but already at the new price level. Thus, prices will absorb the increase in the money supply, real cash balances are restored at the same level, as well as the interest rate.
The condition for the occurrence of inflation is the faster growth of the nominal amount of money or the speed of their appeal compared to the growth of real national income.
According to the identity (quantitative equation of exchange) M V \u003d P q, the conditions of Fisher can specify the conditions. For this, it is resorted to the interpretation of the identity under consideration in terms of growth of the nominal amount of money -, the speeds of their conversion -, the increase in price level -, real income -, i.e. + +, + -.

Then inflation (GT; 0) is possible if at least one of three conditions is performed:
What exactly is worth the quantitative side of the analysis - largely depends on the circumstances.
Exceeding the growth of the nominal amount of money on the growth of production while maintaining the rate of treatment can be explained, for example, weak control over the monetary base and the process of aging of checking money from the banking system or the growing conversion of households of their debt obligations into payment facilities.
Excess growth of the nominal amount of money can be compensated by an increase in the speed of their appeal. That is, inflation may occur in the case when the monetary base does not change, or even decreases. If households reduce the demand for real cash (cash) remnants for various reasons, it causes a decrease in the equilibrium level of expenses (and income). Conversely, the increase in real cash balances causes the greater increase in the equilibrium level of income and expenses, the smaller the sensitivity of the demand for money to the interest rate (I). Unlike money, securities bring percentage and increase the possibilities of consumption in the future, i.e., lead to an increase in income in the next period. .

Thus, it can be noted that the excess of the money supply and the speed of turnover over the increase in real national income is only a formal response to the question of the emergence of inflation, but does not fully explain its causes.
Consideration of the causes of inflation seems possible through the prism of the AD-AS model, where inflation acts as an endogenous parameter; At the same time, expected inflation is distinguished, taking into account the AD-AS functions are considered as dynamic functions.
Exploring the crisis economy of the 30s. XX century, D.M. Keynes substantiated the feasibility of increasing the aggregate demand as a factor of national income growth and the level of employment until all available opportunities for the efficient use of production resources are exhausted, that is, to complete employment. If the demand extension continues further, the effect of inflation is raised. The inflation gap was shown above (see Fig. 1.1.4). Rising prices changes consumer priorities, they are forced to increase consumption to the detriment of savings. The desire to get ahead of the price increase in this leads to the spiral spiral spiral. Reducing savings turns into a decrease in new investment and makes the growth of the output. This is just one of the "scenarios".
The factors causing inflation of demand can be attributed:
- monetary;
- non-monetary;
- structural.
Monetary factors, in turn, are associated: 1) with an increase in money supply; 2) transformation of money as property in the means; 3) with an increase in the speed of the money turnover ("escape from money").
Non-purpose factors are associated with changes in autonomous expenses (consumer, investment, state). At the same time, the state has increased capabilities of the relative change in autonomous expenses. It has the capabilities even in the absence of those in the event of a state budget deficit.
As for structural factors, it should be distinguished by shifts in the sectoral structure of demand, in which if there are changes in prices, then they are insignificant. Shifts in the assortment structure of demand, as a rule, cause a total price increase and to a greater amount of prices for new products.
Until the mid-50s. The Keynesian inflationary gap is considered by many economists as the only reason for inflation, the most important means of the struggle of the state with inflation was the management of cumulative demand.
However, practice has shown that inflation may occur in terms of incomplete employment. That is, with constant demand, the reduction of the offer causes rise to prices.
The reduction of the proposal in turn can be inspired by various factors:
- wage growth;
- races of prices for various types of raw materials, energy carriers.
According to the Keynesian approach, the salary rate seems to be an exogenous parameter, so such variables as the level of income, investment and consumption to the extent that they are in wages are autonomous relative to the absolute price level, in connection with which J. Sauer emphasized: "Since in the Keynesian general theory, the cash rate of wages is usually determined exogenously, it lacks the theory of inflation." Moreover, the followers of Kane also handed his views regarding the role of money, changes in their number as a factory of economic development, which reducing this role.

Light in 1958 Articles by A. Phillips "The ratio between unemployment and the degree of money wage change in the UK, 1862-1957" was, according to economists, a real find for Keynesianism. The correlation dependence between the named variables in graphical form was called the Phillips curve (Fig. 1.3.1).
According to Philips, at the level of unemployment, 5.5% nominal wages does not change. The change in unemployment causes a reverse change of wages.
Later under the curve, the Phillips began to consider the relationship between inflation and unemployment. The legitimacy of such a transformation is explained in different ways, including according to the "cost-plus" method, when the price of a unit of products exceeds the costs of wages on some value (A%). The price equation can be represented as:

P \u003d (1 + a),

where Z is average performance.

If you express this equation in the logarithmic formula, directly in time with (1 \u003d a) const, then we will get :.
Then in the new interpretation, the Phillips curve will be held below its "predecessor" by magnitude and will be parallel to it.
Then in the new interpretation, the Phillips curve will be held below its "predecessor" by magnitude and will be parallel to it.

6 E2.
5
4
3
2
1
0 | | | | |
1 2 3 4 5
change of unemployment
Fig. 1.3.2. Phillips curve

Empirical analysis confirmed the relationship between inflation and unemployment so much that A. Oken compared the correspondence of the curve of the Phillips of American statistics of the 1954-1968 period. So how the glove is cutting down. Thus, the ideas of the Phillips were organically fit into the toolkit of Keynesianism and were successfully used in the political practice of the United States, England and other countries until the economy was in the state of stagnation.
In the global economic literature, common causes of inflation for all countries are allocated.
1. Growth of the public sector and state intervention in the economy. All this leads to the imbalance of public spending and income, which is expressed in the deficit of the state budget. Financing the state budget at the expense of loans in the Central Bank, i.e., uncontrolled monetary emission, inevitably leads to an increase in the mass of money in circulation.
Unnecessary cash payments dramatically worsen the situation in the consumer market.
Similar consequences can cause non-productive consumption of national income (for example, for military purposes or to implement the projects of the Century). Military expenditures create additional demand leading to the growth of the money supply without the appropriate coating.
2. The emergence of major private institutions in the person of the largest firms and transnational corporations, on the one hand, and trade unions on the other. Any monopolist or oligopoly is interested in creating a deficit (reduction of production and supply of goods), which allows him to maintain a high level of prices. Similarly, trade unions are also valid, referring to the need to maintain the living level of their members. Thus, their joint efforts make prices and salary move up. The inflationary process in a large extent affects the nature of the national economy and market. In particular, the dominance of monopolistic structures in the economy, the prevalence of imperfect competition in the markets is the favorable environment in which inflation trends easily and strengthen. The monopoly position of enterprises allows not only to breed prices, but at the same time to reduce production in order to even greater prices and maintain them at a high level. Artificially reducing the elasticity of demand, monopolistic structures are suppressed, inhibit the reaction of production to demand (even if it is inflationary) and thereby reinforcing and extend the emerging inflationary equilibrium.
3. The economy is becoming increasingly service-oriented.
The productivity of labor in the service sector is growing slower than in the production of goods, which, however, does not affect the payment of workers employed in it, but affects prices.
4. Action of income indexing mechanisms. The latter substantially change the principles of the functioning of the economy. Higher prices now do not hold consumers from purchases, but make their expectations and positions are much more aggressive. The government, guided by the goal of ensuring social stability and restrain the recession, satisfies the growing demands of the marginal layers of society and thereby actually "lubricates" the brake shoes inflation.
5. The irrational structure of the economy. If a military-industrial complex occupies a significant proportion in the country, then this means that there are significant monetary amounts received by employees of this sphere. At the same time, the products of the military-industrial complex on the domestic market does not receive, and there is a discrepancy between supply and demand. A similar situation occurs when an unjustified increase in the sectors of the first unit.
Inflation processes in the national economy can be provoked by international exchange. This is done on two channels. On the one hand, through the price mechanism of international trade, when the rise in prices for import resources gives a new impetus to inflation costs within the country. On the other hand, through the mechanism of movement of short-term capital associated with national differences in interest rates. Higher interest rates cause capital inflow from other countries, which are drawn into the sphere of circulation, thereby incinerate money supply. Consequently, higher interest rates, affecting the arrival of short-term capital from the outside, increase and accelerate the inflationary process.
However, inflation, along with shafts, has specific features in different countries. It may reflect the features of the economic structure of the production of goods and services, their compliance with the real needs of the economy.
Giant expenses for the maintenance of the military-industrial complex and the army, the backwardness of enterprises of the civil complex, numerous deficiencies are usually characteristic of underdeveloped countries.
In fact, high hidden inflation, the presence of a large number of super monopolies in the face of ministries and departments - these features are inherent in the Russian economy.
With a centrally planned economy, the manifestation of such disproportions was suppressed by price manipulations, administrative redistribution of resources, the use of state monopoly on foreign trade and currency operations. With the liberalization of the economy, these features disappeared, and the structural unbalance was on the surface. She gave a powerful impetus to inflationary processes, predetermining their depth and severity.
Thus, in the domestic economic thought of recent times there was awareness that inflation is not only a monetary and production phenomenon, but also a complex socio-economic phenomenon.
Russian economists were divided into two peculiar camps: those who associate inflation in Russia only with monetary (cash) factors, and those who believe that the cost inflation generated by non-monetary factors dominates the inflation of demand.
According to the analysis of the Ministry of Economic Development, the share of factors affecting inflation in 2001, 2002. shown in table. 1.3.1.

Table 1.3.1

The proportion of factors
influencing inflation in Russia (2001, 2002)

Ending table. 1.3.1

Thus, it is equivalent to the monetary nature of inflation there are a lot of grounds for the conclusion about the significant value of cost inflation in the Russian economy. By its reasons, the following can be attributed:
- technologically backward, costly structure of production, a relatively low level of productivity of social labor;
- inter-sectoral imbalance, structural disproportions of the previous economy ("Reliability" of the economy, high degree of militarization, breaking prices for raw materials and final products, etc.);
- rupture of economic relations due to the collapse of the USSR, CEV;
- high degree of monopolization of the economy, including in commodity markets;
- the incompleteness of the formation of the market infrastructure, a high degree of bureaucratization and criminalization of the economy;
- hypertrophied growth of "business services" (mediation financial nature, etc.), strengthening the role of speculative began in the economy;
- A sharp rise in energy prices during the transformation of the Russian economy (the price of prices is due to artificially lowered energy resources in the planned economy).
The problem of inflation is relevant, and therefore the search for its causes is very active only inspired, since the consequences with which people deal are very tangible and ambiguous. In the conditions of inflation, economic entities actually pay another tax, which should not be ratified, which is not provided for by the tax system - inflation tax Ti. If economic entities will support their real cash balances at an optimal level, then they will have to increase from the current revenue of the appropriation on the growth of its cash register in accordance with the level of inflation :.

Inflation reduces the standard of living of the considerable mass of the population as a result of reducing their real income. More losses from inflation are people receiving fixed income. Recipients of non-fixed income may even increase real incomes if the nominal will increase to a greater extent than prices.
The recipient of the inflation tax (sense of Si) is the money supply issuer. ,

where MC is the cost of making new money.

Inflation will inspire the redistribution of income and wealth.
This process is possible in conditions when income is not indexed, loans are provided without taking into account the expected level of inflation, which leads to the redistribution of national income in various directions:
1) between different spheres of production and regions due to uneven increases in prices;
2) between the population and the state, since the state uses excessive monetary emissions as an additional source of its income. Releaseing paper money not provided by goods, the state actually carries out a hidden taxation of citizens through the effect of the effect of inflation taxation. It is manifested in the economy where the progressive income tax system is valid. The economy as inflation increases automatically enrolls various social groups in increasingly wealthy categories of citizens, regardless of whether income has increased real or only nominally. At the same time, the indexation of all incomes is ineffective, for due to the unbalanced increase in prices, the separation of the nominal value of income from the real, and in various population groups in different ways, at different times and at different speeds is intensified. Unified indexation evaluates all incomes formally, i.e. at par;
3) between different social sectors of the population. Fast social bundle, deepening property inequality - inevitable inflation satellites.
Inflation causes impairment of savings. At the same time, it is quite often the inflation rates not only drive "no" revenues due to deposits, but also depreciate the contributions themselves. In such circumstances, people prefer to transform savings to liquid funds. Alternative cost or impregnated costs under these conditions are depreciated, whereas the benefit of cash assets increase significantly. However, the inflow of cash resources to an even greater degree exacerbates the situation, since the change (increase) of demand causes an even greater price increase. And this reduces the real incomes of the population. Unprecedented savings impairment occurred in Russia during 1992-1993. Accepted in 1994 and in 1996. Measures to compensate for savings recorded at the beginning of 1992 are no more than moral consolation, but not compensation, because over these years the prices have grown thousands of times.
The factor leading to a decrease in the vital level of the population is the so-called inflation taxation. Its essence lies in the fact that while maintaining relatively stable tax rates and the implementation of the indexation of nominal income occurs to the state budget of the increasing part of the incomes of the population.
In terms of inflation under the action of a progressive tax scale, income indexing leads to the fact that increasing nominal income is gradually accessed by increasingly tax rates. The taxpayer, in addition to his will, goes into a group of citizens taxed by a higher tax rate, leads to a reduction in its real income and allows to increase the revenue part of the federal budget without changing the tax system.
At the same time, due to significant lags in tax collection, tax liabilities are accrued at a certain point, but the payment is made at a later date. In many countries there is no mechanism that would support the real value of tax collection during this period. Thus, any increase in the inflation rate during this period reduces the tax burden. This phenomenon is known as the Oliver Tance effect, which can lead to a vicious circle. An increase in fiscal deficit causes an increase in inflation, which, in turn, reduces tax revenues; Lower tax revenues further increase the fiscal deficit, etc. This process can be very destabilizing, and it has largely contributed to the emergence of most of the manifestations of inflation in developing countries in the 80s. of our century.
Dramatic illustration of the effect of Oliver Tanzi based on the experience of Bolivia in the first half of the 80s. Presented in Fig. 1.3.3.
State revenues in this country in 1980-1981. 10% of GDP were close, and inflation was approximately 25% per year. In 1982, inflation increased almost to 300%, income in percentage of GDP decreased half. Such a decrease continued in the following years; worse

Fig. 1.3.3. Illustration of Oliver Tanzi Effect:
Bolivia, 1980-1986

(Inflation data taken from Cepaz, Economic Survey for Latin America, 1988; State expenses data taken from J. Sachs, "The Bolivian Hyperinflation and Stabilization", National Bureau of Economic Research Working Paper No. 2073, May 1986)

it happened in 1985, when Bolivia entered into a strip of full-scale hyperinflation. At this time, tax revenues decreased to about 1.3% of GDP, which could well be considered the lowest tax burden in the world. However, we note a sharp change in 1986 as soon as a successful stabilization program was embodied and inflation fell up to 66% per year, state revenues increased and amounted to more than 10% of GDP.
For inflation tax, as shown in Fig. 1.3.4, there is a Laffer curve. The 0ML curve represents the income from inflation tax for various inflation rates, if it is assumed that the economy is in a state of equilibrium and the inflation rate does not change from the period by the period.
When the inflation rate is zero, the income is also zero. As inflation grows, the tax base (in this case, this demand for real cash balances is reduced. The maximum inflation tax is shown as Ti.max at inflation rate. Further inflation growth entails reducing income, since higher inflation does not compensate for the incidence of the level of real cash balances, which are taxed. This happens on the Laffer curve ML site.
Hence the important conclusion. With a stable rate of inflation, there is a maximum deficit equal to Ti.max, which can be financed by printing money. The government can temporarily finance the deficit higher than Ti.max, but by accelerating inflation instead of maintaining its stable tempo.

Fig. 1.3.4. Lapper curve for inflation

In the period of accelerating inflation, it may be that the population invariably underestimates real inflation rates and, it means, keeps a higher level of cash balances than it would be if it knew exactly what inflation would be. The government can use erroneous expectations for the preparation of a seny, superior to Ti.max at least for some time. If the government is trying to finance a long time than Ti.max, the deficit, the likely result will be hyperinflation.
In addition to the negative impact of inflation on the well-being of the population, it has no less negative impact on the production, on economic activity as a whole. First of all, you must specify the two parties to contain investment demand. Under the inflation of inflation, depreciation occurs, on the one hand, depreciation deductions, on the other, the accumulation fund. As a result, both gross, and net investments "dry out" significantly and do not allow planned projects and activities related to the technical reconstruction of production, updating and modernization of the equipment used, new construction, and this leads to restraining NTP, a slowdown in economic development.
Due to inflation, depreciation deductions are lost. Inflation practically devalued this source of investment. We need a regular indexation of the book value of fixed assets.
The rapid impairment of cash savings pushes their owners to active use, which often causes hasty, poorly thought out and excessive consumption of real resources, violation of intersectoral proportions.
In the public sector of the market economy, prices both resources and manufactured goods are revised less frequently than in private. This is explained by the fact that state-owned enterprises are forced to justify their prices and receive permission to revise their state bodies. In the conditions of an indefinite and hopping nature of inflation, the price regulation mechanism is technically difficult to establish, not to mention strategic price stability. As a result, the imbalance of the private and public sectors increases, and the state loses its potential and loses the possibility of adequate impact on the economy. This effect is particularly dangerous in the transition from the administrative and commanding system of economic management to the regulated market economy.
Inflation significantly undermines the motivation to active business and work. For entrepreneurial circles, especially in the field of production, uncertainty in the pricing mechanism significantly increases the degree of risk in the implementation of certain investment projects. At the same time, it becomes more and more difficult for them to receive loans. This cannot but affect the reduction of the supply of goods and services.
The impact of inflation to production is controversial and depends on its size. Moderate harm inflation does not bring, moreover, its decline is associated with increasing unemployment and a reduction in the real national product. In some cases, it can even cause temporary revival of the economy, create a specific inflationary conjuncture when the growth in demand gives impetus to expansion of production.
High inflation actively counteracts economic growth. Under the average annual rates of inflation, about 40% and higher economic growth is usually stopped. It is true: the lower the inflation rate in the country, the usually above the rate of economic growth, and they are maximal with the minimum rates of inflation. This is confirmed by studies of the dynamics of economic development over the past 20 years in most countries of the modern world, which adhered to different models of economic policies.
Inflation processes also undermine the incentives for the growth of the economy on the basis of NTP, since the introduction into the production of new techniques is becoming more and more expensive. For an entrepreneur, in these conditions it is more profitable to use outdated, but cheaper equipment, and old labor-intensive technology. The reason for using the latter is that the costs associated with wages are usually growing slower than the cost of purchasing means of production.
There is a general slowdown in economic activity. Undefined development prospects, the lack of necessary accuracy in the forecasts of the price dynamics cause entrepreneurs to abandon the implementation of long-term projects with long payback periods. Most of the capital moves from the sphere of production in the sphere of circulation and is used for purely speculative operations.
The trend towards the growth of the loan interest, designed to compensate for the impairment of money. The costs associated with increasing money circulation and release of new money are growing. The flight from money to the goods is activated, the trade hunger is sharpened, which undermines the incentives to the cash accumulation, which in turn violates the functioning of the monetary system and revives Barter.
The above lists mostly internal effects of inflation, but external. Impairment of money inside the country leads to their impairment in relation to foreign currencies (through the difference in the purchasing power of currencies).
Hyperinflation brings the greatest harm to the national economy, in the course of which the state loses control, the national currency is supplanted with a more solid one.
The collapse of the cash circulation system is inevitably followed by the decomposition and degradation of the national economy, separatist trends in the regions are manifested. Numerous social cataclysms contribute to the coming to the power of totalitarian regimes.

Author Sergey Nikolaevich Blinov - Deputy Head of Strategic Planning Service - Head of Macroeconomic Studies and Strategic Forecasting PJSC KAMAZ, Naberezhnye Chelny.

One familiar editor somehow hinted me that I, apparently, looked at the topic of the "real money supply". For a long time and in different kinds, I try to bring one and the same thought to my readers: there will be no growth in the economy until the real money supply will begin to grow the right pace.

The editor was understood: "Is it time to change the topic?".

I replied that in my opinion, if my persistent recommendations were not fulfilled, the topic should be changed early. It is like in a famous joke:

Husband complains about a drinking companion on his wife: "May 1, the sun shines, all people with a festive mood! And she laid out: I get a Christmas tree, but I will bring the tree ".

The editor for my answer, sent an example of a "wider" look at things. As the cause of problems in the economy in this example, a high percentage, heavy taxes, an increasing loan, an overvalued ruble, redundant regulatory press, budget cut, problematic banks, inflation at 7-8% (wholesale prices) were named.

Yes, against the backdrop of such a wide listing of various factors, I, with my "urgentness" and a loop on the topic of the money supply, really look not in the best way. I had to answer. I bring this answer below:

"... a high percentage, heavy taxes, low-cost credit, etc. etc. - This is a description of the current situation. But none of the listed signs of the situation is the cause of low growth rates.

You can go through items.

1. High percentage. The high percentage is not a problem for growth and, on the contrary, a low percentage is not a guarantee of growth.

The most visual confirmation:

2. High taxes. High taxes are not difficult at all, but a sign of high development of the economy. When people are hungry, then they need to give money directly to buy food. When people are rich, they are useless to give them extra money, because they become needed roads, parks, sports palaces, security. Individually, for your money, you will not build the road, the park in the city will not break, the house of culture or the sports palace will not erect. It is necessary that people are "discarded" to public benefits. Therefore, with increasing wealth, the share of taxes increases. That is why the tax burden in the same Europe is significantly higher than we. But this is not a misfortune, but benefit: clean cities, public spaces, social security, publicly available medicine ...

3. An inflounted loan. The availability of a loan depends on the two components: interest rates and income / profits. Urgently: if you get 300 thousand per month, then a loan that gives you a monthly 75 thousand rubles for a mortgage apartment (under a high percentage) is not a problem. If you are unemployed (purely for example), then even a loan under 0% will be in a burden: percentages are not necessary to pay, but how to give a loan body?

4. Revalted ruble. The revaluation of the ruble is absolutely indifferent to GDP growth. This is an example and Russia, and other countries. For example, from 32 rubles per dollar in January 2003, the ruble continuously strengthened up to 23 rubles per dollar in July 2008. Remind that it was at this time with the growth of GDP? Moreover, this strengthening occurred in nominal terms. If we talk about the real strengthening of the ruble exchange rate, it was even stronger (due to the difference in inflation levels in Russia and major trading partners).

Another example: Japan.

In 1985, the United States was very concerned that the dollar was too strong for Mark, Jena and other currencies. The hotel "Plaza" concluded a well-known agreement on which Germany, Japan (and some others) agreed to strengthen their currencies towards the US dollar. And the strengthening took place. Do you think Japan has become worse? On the contrary, GDP growth continued until 1989, because the growth rate of the money supply remained high. The Japanese then bought Hollywood, at the auctions in New York, the masterpieces of world painting began to go to Japan, because no one could bargain with them, half in the top ten largest banks of the world were Japanese. Capitalization of Japanese companies amounted to 40% of world capitalization. And the strengthening of this did not interfere (and even in a certain sense helped - all what you want to buy in the world). But as soon as the growth rate of the money supply decreased, the transition from the "Japanese miracle" to "Japanese lost decades"

5. Cutting budget. I will not give examples, but the deficit or budget surplus is not a reason, but a consequence. A little simplifying can be said that the budget in the surplus, when the economy is growing, and in a deficit, when the economy falls. (See also p. 2). And the economy cannot grow, if the real money mass does not grow (here the circle is closed).

6. Problems of private banks. It is confident to say that the thread of the money supply leads to voltage in the banking system. It was both a great depression and even in the "invisible" (for GDP) crises in the banking system in Russia in 2002, 2004, not to mention the crisis 1998, 2008, 2015. Now the cash clamp continues.

What to say if the monetary base for 10 years has not changed in real terms.

7. Inflation 7-8% (wholesale prices). There is a clear pattern: when the prices of manufacturers (apparently they mean under wholesale) grow faster than consumer prices, then in the economy of Russia there is an increase. When on the contrary: drop. So if the prices of producers grow by 7-8% with inflation 2.5%, then this should only be rejoiced. For me, the mechanism is clear. Why this happens (and believe me, this was not discovered in the economy) I described in the article "Deflation under the mask". But I immediately warn you, you need to tune in to read and penetrate. The text is not short. If there is no time, you can start with the words "Real deflation is easily considered". "

Sergey Blinov

Even on the topic

1. To which phases of the classic economic cycle (crisis, depression, revival, rise) include the following economic phenomena:

a) rapid drop in prices;

b) a slight increase in production;

c) overproduction of goods;

d) suspension of falling prices, stabilization of inventories;

e) price increases and reducing unemployment.

2. The threshold is used in the description of cyclic processes. What are the types of threshold magnitude? Give examples known to all thresholds in macroeconomics.

3. Consider the mechanism of cyclic development of the economy, built on ideas:

a) update of fixed capital;

b) Connections of a multiplier principle with an accelerator.

What causes the movement on the phases of the cycle in each of these models? Can they be used to explain the flow of the cycle phases if the crisis phase was caused by preproduction?

4. In what sense are we talking about the natural level of unemployment? Is unemployment - is it a "natural" phenomenon for a normal economic situation?

5. Jewelers are customary to call the first bankers, as they took for a certain remuneration for storage gold and other values \u200b\u200bfrom the population. What, however, the fundamental difference between banking from the storage chamber functions?

6. Consider the following components of the money supply:

a) metal money in stock;

b) urgent contribution to the savings bank;

c) you have banknotes in your hands;

d) bonds of the state loan;

e) current account in the bank.

Which of the listed articles are included in the M1, M2 monetary unit?

7. Are the following statements are true:

a) "The demand for money from the asset is in the opposite dependence on the interest rate"?

b) "The demand for money from assets is in the opposite dependence on the value of nominal GDP"? Explain.

8. There is a fairly high level of inflation in the country. It is necessary to quickly take measures and slow down inflationary processes. What will the Central Bank be taken in this situation? What directions of credit and monetary policy will be preferred?

9. How to distinguish inflation from hyperinflation? Among the economists there is a funny joke about the way of distinguishing these concepts: for example, you, in the conditions of the All-term rates of inflation, received a salary - a huge bunch of paper money, which was placed in a large basket. On the way home, you went to the phone-machine to call familiar, and the basket with money was left on the asphalt. If after a conversation, coming out of the cab, you found an empty basket, then this is just inflation. And if all your pile of money is lying on the asphalt, but stole a basket, then it is hyperinflation! Could you give a scientific comment of this joke from the point of view of economic theory?

10. What is preceded by the deployment of inflationary processes:

a) the growth of money supply precedes price increases;

b) Rising prices precedes the growth of the money supply.
(Tip: Once again, analyze the mechanism of inflation and inflation of costs).

11. Famous French economist L. The Council in his book "Equilibrium and Economic Growth" wrote: "As often they say, inflation is primarily faith in inflation." Do you agree with this statement? And here faith and, in general, psychological aspects when explaining economic categories?

12. Some economists emphasize that the main reason for inflation is political. So, M. Dambrovsky, former in 1989-1990. First Deputy Ministers of Finance Finish, claimed: "Any inflation primarily has political roots." Similar views were expressed by such economists as F. Hayek, Ya. Kornai, etc. Do you agree with this statement? With any answer, argue it.

13. Inflation indicates a violation of the sustainability of money circulation, which occurs if the amount of money supply significantly exceeds the amount of demand for them. Failure to comply with the necessary equality of money flows and goods occurs, as a rule, not spontaneously or "automatically", but on someone's deliberate economic activity both within the country and in the international arena. Therefore, you can ask for a question about whose fault has been issued in an excessive amount of money. What is your opinion on this issue?

14. When considering economic growth in the enterprise, it was revealed that the private owner of the capital to strive through the accumulation (expansion of production) to achieve maximum increase in profits. However, if such a goal becomes the main goal of the nation, then it is obviously a relatively small part of society (approximately 10-15% of the adult population of the country) at the expense of the rest. As a result, the social bundle of society increases, which is fraught with dangerous conflicts between different income level by layers. Obviously, the optimal (best) goal of economic growth is to increase the life level of the entire population.

a) What is the source of economic growth of the whole nation?

b) What economic indicator most of all corresponds to the optimal goal of nationwide economic growth?

15. Since the beginning of the XIX century. The capitalist economy in all countries was not moving along a smooth road. One of the segments of such a road brightly and truthfully depicted the American writer John Steinbeck (1902-1968) in the novel "Breaks of Angel" (1939): "Oranges with whole cars refer to Earth. People go for a few miles to pick up the thrown fruit, but it is completely unacceptable! Who will pay for oranges of 20 cents per dozen, if you can go beyond the city and get them for nothing? And the orange mountains are poured by kerosene from the hose, and those who do it hate themselves for such a crime, hate people who come to pick fruit. Millions of hungry need fruit, and the golden mountains watered kerosene. "

a) What segment of the development of the economy wrote J. Steinbeck?

b) How is the trajectory of economic activity as a whole?

16. What forms of unemployment includes the following manifestations:

a) dismissal from work due to childcare;

b) dismissal during the crisis of overproduction;

c) dismissal in connection with the beginning of study;

d) dismissing miners due to the development of the use of alternative energy sources?

17. Does the concept of complete employment mean the absolute lack of unemployed?

18. In the second half of the 20th century, the reasons for unemployment are primarily associated with the scientific and technological revolution. In this regard, intensified changes in the market conditions for the sale of labor force played their role. What do you think specific types of unemployment are characteristic of recent decades?

19. The essence of the task of ensuring the employment of the working population is to achieve equilibrium the number of economically active population and the number of jobs necessary for it. It is important to ensure the compliance of the profession of workers and specialization of jobs and types of technological operations. In the context of the modern market economy, the task of employment of people is performed by both enterprises and the state.

List practical measures taken by the state in the exercise of their employment policies.

20. Cash treatment may be sustainable in practice at two actually reached conditions:

a) subject to equivalence (equivalence) of goods (services) and money streams (since no equivalence equality of these flows is unattainable);

b) with a reliable mechanism of balance (balance) of the value of goods and money (the mechanism that acts as it were, when the cash circulation is devoting to the equilibrium state).

Was there a period in the history of commodity and market relations when two specified conditions were respected?

21. Picture economic growth on the schedule using the production capacity curve.

Tasks

1. The population is 100 million people., 24 million people. - Children under 16, as well as people in lengthy isolation (in psychiatric hospitals, in correctional institutions, etc.); 30 million people dropped out of the workforce; 4 million 600 thousand people. - unemployed; 1 million people - Workers employed part-time and job seekers. Using these statistical data, calculate:

a) the magnitude of the labor force; b) the unemployment rate.

2. The natural level of unemployment in the current year is 6%, and the actual - 10%.

a) Determine the value of the relative lag of the actual GDP on the potential, provided that the GDP sensitivity coefficient to the dynamics of cyclic unemployment is 2.

b) If the actual volume of release in the same year amounted to 600 billion dollars, what are the loss of GDP caused by cyclic unemployment?

3. There is also the following information: the number of employed 85 million people, the number of unemployed 15 million people.

a) Calculate the unemployment rate.

b) a month later from 85 million people who had work were dismissed 0.5 million people; 1 million people from among the officially registered unemployed ceased work searches. Determine what now: (1) the number of employed, (2) the number of unemployed and (3) the unemployment rate.

4. Using the OUCEN law, calculate the value of GDP's loss in the actual level of unemployment 9.4%, the actual production volume of 585.3 billion rubles, provided that the natural level of unemployment is equal to 4% and the sensitivity coefficient of GDP dynamics to the dynamics of cyclic unemployment is equal to 3.

5. Calculate the actual unemployment rate if the actual volume of GDP is 585.3 billion dollars, potential GDP - $ 771.4 billion, the natural unemployment rate is 4.5%, and the sensitivity coefficient of GDP dynamics to the dynamics of cyclic unemployment - 3.5.

6. The economy is described by the following data: the natural unemployment rate is 6%, the expected level of inflation is 3%, the relative deviation of real GDP from a potential less than zero. External price shocks are missing. What is the actual inflation rate?

7. Suppose in the economy of the country the unemployed is the average every tenth citizen, and not part of the workforce - every sixth. Determine the unemployment rate.

The growth of money mass is preceded by price increases. Effect of money supply increase

Inflation due to expensive oil or grief from the mind

Kudrin hypothesis is not confirmed

Demand gives birth proposal, not inflation

GDP growth as a consequence of money growth

GDP growth by 10% not the limit

How to deal with inflation by creating "long money"

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