Do u think a decrease in money supply would fix the inflation problems of these&other postcommunist countries?

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I think the FED has to take it as a lesson. It is a try to cover a failure in 1930s because of tight money policy against depression. It was warned before by economists that QE will create a L,a V or a W.
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  • R answered 3 years ago
    The solution is to increase productivity and stop printing money. Once productivity is improved, the additional goods and services will soak up the extra cash floating around and inflation will be resolved.

    Of course the next question is how do they increase their productivity substantially?
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  • Alby answered 3 years ago
    Inflation Begins and Ends with the Central Bank. If you are to decrease inflation, you've got to reduce the money supply. Although its a heavy handed measure. The more gentle approach would be to
    raise interest rates and force the cost to borrow money to be unaffordable to most, thus reducing the availability of money to fuel inflation.

    For example, if buying a new car cost $30,000 and rates are 15% on that 5/yr loan, you'll pay $713.69/month. Whereas a 5% rate would be $566.13/mo. That much extra money a couple
    has to come up with per month might mean they opt not to buy that car. That in turn means less
    cars from the factory. Which means less money to all the suppliers, which means everybody eventually ends up broke and unable to afford higher prices. That in turn forces companies to lower prices. And thus begins a softer downward spiral in curing inflation.
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  • SDD answered 3 years ago
    The money supply is what determines the unit value of the currency. So if you decrease the money supply the unit value will increase (deflate).
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  • ashtonrohan answered 3 years ago
    A decrease in money supply is definitely required in order to combat inflation in not just the post communist countries but in any country in general. It would actually be one of the pre requisites. But it is not a quick fix and other measures would also be required to combat inflation depending on the area and specific problems.
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