Err... I read protectionist policies from the North was almost as big a reason for the civil war as slavery for the South.
Hyperinflation and LF?
- Thread starter Biges
- Start date
-
We have updated our Community Code of Conduct. Please read through the new rules for the forum that are an integral part of Paradox Interactive’s User Agreement.
Doesn't meant they can't be protectionist themselves...they advocated the right of the states to secede, but created their constitution so that their states could not secede.
The Confederate Congress imposed both regular import tariffs and export tariffs (despite tariffs in general being strictly forbidden in their constitution, funnily enough), so protectionism is more or less a moot point as far as Civil War causes go.
Last edited:
You are correct, but I think the invention chance could be explained in the following manner: since laissez faire governments can't intervene more directly in the economy, they are more dependent on monetary policy, and as such would be more likely to overprint when facing dire economic straits.
Inflation /= Price Inflation and Price Fixing /= Solution to Price Inflation. The only fix there is the hard reset to a sound monetary policy. Price fixing only serves to create shortages followed by rationing, as someone else mentioned. And as the above commenter posted, I think laissez faire is abstracted in this game as a government with little 'direct' interference in the market, but still giving in to the temptation of 'indirect' interference via the money supply.
Didn't you mean a government (like revolutionary French one) price-fixing while continuously printing new money?
Anyway, wouldn't it be extremely impractical to price-fix in the aftermath of printing money into the hyper-inflation range? I mean, since the money supply is so huge the value of the money (in percentage) would fluctuate greatly (which would again lead to either goods being too expensive or too cheap), correct? And especially if the economy lacks tools like computers and telephones to correct the money-value.
EDIT: Correct me if I'm wrong, people. And indeed Biges, the only perquisite required for becoming a politician is ambition. Isn't it?
Last edited:
Price fixing in hyperinflation does not work, people simply trade via the black market or with foreign currencies or, in the worst case, just barter.
Whatever makes people go to politics, they seem to lost the common sense on the way. But that would probably be a topic for another discussion
Whatever makes people go to politics, they seem to lost the common sense on the way. But that would probably be a topic for another discussion
I've given it a bit more thought. I think I will concede the field here:
The French case is somewhat exceptional compared to this time period. Agriculture was ~60% of the workforce, agriculture would have had significantly more inelastic supply, so the government's shifting of the burden of inflation onto that sector would have been spread more widely and enforced more perfectly (by the inelasticity and by the paramilitary mobs). This is not true of any postwar economy in Vic2 that would get anywhere near this unlock.
The price/wage spiral theories of inflation seem to have significantly less traction than I was aware of. We were probably arguing from different sides of a paradigm, and I'll definitely yield to those for which this is more their expertise.
I would poke around more, because there seems to be interesting debate behind this, but I have other research interests pending right now.
The French case is somewhat exceptional compared to this time period. Agriculture was ~60% of the workforce, agriculture would have had significantly more inelastic supply, so the government's shifting of the burden of inflation onto that sector would have been spread more widely and enforced more perfectly (by the inelasticity and by the paramilitary mobs). This is not true of any postwar economy in Vic2 that would get anywhere near this unlock.
The price/wage spiral theories of inflation seem to have significantly less traction than I was aware of. We were probably arguing from different sides of a paradigm, and I'll definitely yield to those for which this is more their expertise.
I would poke around more, because there seems to be interesting debate behind this, but I have other research interests pending right now.
I still don't understand how it is possible to price-fix goods while continuously expanding the money-supply (without demand for money increasing), though.
But at any rate, I think everyone agrees that hyperinflation should:
a) NOT be an invention, but a modifier.
b) Have a chance to happen when the economy is going to hell. Like during times of high war-exhaustion & debt.
But at any rate, I think everyone agrees that hyperinflation should:
a) NOT be an invention, but a modifier.
b) Have a chance to happen when the economy is going to hell. Like during times of high war-exhaustion & debt.
Well... Europe Universalis has quite well implemented concept of inflation. Maybe this is a challenge for V2 to also include it?
The last word is key. AFAIK governments dont print money, they borrow it and all money is debt. So, if there´s a lot of debt, there´s a lot of money and if there´s a lot of money, it can lead to (hyper-)inflation. Hence if there is an event called hyper-inflation, its trigger should be bound to debt, and nothing else, really.
Jazumir, you're speaking to modern government financing. The use of a private company or independent governmental agency to handle monetary policy is a given these days exactly because of the discussed issue. We wouldn't have an image of "wheel-barrows" of money for a loaf of bread if this went hand-in-hand with fiat currency.
Not in a fiat money environment. The government prints money and by force of law tells us that it's money rather than backing it up with any specie. I'm wondering if the criteria of having a LF govt is meant to imply that this happened more often in nations with free banking. There were banking panics pretty regularly (almost every decade actually) in the 1800s: http://en.wikipedia.org/wiki/List_of_banking_crises
In most modern countries it is the independent monetary authority - central bank, currency board, what have You - that prints money and decides on the level of the money supply. It's true that central banks use Treasury bills or gov't bonds as reserve backing for printing money - in other words, they monetise gov't debt - but ultimately they can adjust the level of currency or bank reserves to set whatever level of base money they want.
Two things:
First, banking panics most usually result in a DEcrease in money supply, which is rather unlikely to lead to inflation, let alone hyperinflation.
Second, You claim that banking panics were more frequent under free banking.
Except they weren't. The US banking system was quite special in that it was heavily regulated on the state level in a way that, some free-banking specialists theorised could have contributed to monetary instability. England didn't have free banking at the time. On the other hand, certain other countries that had free-banking regimes had few (Scotland) to no (Canada) financial crises throughout the XIXth cent. Furthermore, comparing graphs of money supply aggregates in the post-CW US (regulated national banking) and Canada (regulated free banking), it seems the latter system was much more responsive to cyclical and secular changes in money demand. While there haven't been any cross-country empirical studies that I know of comparing the performances of the two systems, there is very little reason to believe that free banking leads to instability either way.
While I would certainly prefer that economic policy be represented in a more disaggregated way - after all, there is so little correlation between the amounts of interventionism in different branches of economic policy - it's understandable that Paradox would choose to represent it as one big variable. While advocacy of free banking and commodity-based currency - both, whatever their other flaws, not being susceptible to hyperinflation - was typically correlated with advocacy of LF in the XIXth century, maybe it was the case that more economically advanced countries, which often had LF regimes, were also put under more pressure to generate gov't revenue and to cater to the needs of the financial sector, making the establishment of a central bank or fiat money - more susceptible to hyperinflation - more likely. That's the only reasonable explanation I can think of.
Not really appropriate, tho, since the 19th century was actually a period of relatively huge deflation IRL. As one would expect from sitting on a bullion standard in a period of massive productivity increases.
And, as I always stress when the economics degrees start to get flashed about in threads like this, PLEASE remember that the V2 economy is nothing like the real-world economy and never can be. Currency velocity is fixed at 1 transaction per day, there's no storage of surplus goods, and regions produce a single fixed crop rather than having any form of diversity. Qualifications in economics are great for analysing the data of the game, but you have to use that training with the data at hand rather than trying to use the real-world examples that you've been taught (and, as an economic anthropologist, I'd argue a lot of those examples were made up too, but that's an argument for elsewhere). We don't need another Patton on our hands, insisting that the game can only work if it's totally re-coded along neoliberal free market doctrine (cos that worked so well in real life), and wilfully ignoring the differences between the game mechanics and the real world.
I think, regardless of the system, that government debt represents additional money injected into the system. Even if the gov did not actually hand out its negative balance to the recipients yet, those can still say ´hey, it´s the nation itself owing me - you can trust me, i will be able to pay soon´, when trying to buy stuff, and thus monetise the debt.
From the game-play perspective, the events could work as ´warning shots´ to approaching bancruptcy. Because, once the guy the debt-holder wants to buy stuff from with the debt gets denied (´uh, you mean that nation, that has like a gazzilion in debts already? No, thanks.´)... well, that´s when you are bancrupt, basically. But as long as this doesnt happen, gov-debt is extra-money inserted, IRL as in game, since the loan-checks of state-employées are still being paid.
If your in-game government is a million in the minus, that means, that you created a million out of nowhere and passed it on to your ´subjects´. That extra million in currency would simply not exist without the debt. On the level of abstraction of the game, it is simply ´extra-money´ and what, if not that, should cause inflation?
The thought crossed me, that it could apply to the other end of the scale as well: If you stockpile money. But that is actually money taken out of circulation, hence not effective, and if anything should cause deflation. Only if too much of it is spent in too short a time, it could cause the contrary, i postulate...
So maybe it should be that: Money spent per time. Anyone remember the global warming meter of Civ1? Something like that would be neat. If you spent too much too fast it goes from green to yellow, then to red with increasing chances of inflation. If you spent too little, it goes the opposite direction and ´below zero´ changes form (say from circle to rectangle) and again from green to red with increased chance of deflation. Both events are bad, generally speaking, so you´d want to avoid them both and thus ´zerging´ (I hope the term kind of fits and you get what i mean) is discouraged. You´d want to spend the same this year as last, at least by order of magnitude, each year, roughly.
From the game-play perspective, the events could work as ´warning shots´ to approaching bancruptcy. Because, once the guy the debt-holder wants to buy stuff from with the debt gets denied (´uh, you mean that nation, that has like a gazzilion in debts already? No, thanks.´)... well, that´s when you are bancrupt, basically. But as long as this doesnt happen, gov-debt is extra-money inserted, IRL as in game, since the loan-checks of state-employées are still being paid.
If your in-game government is a million in the minus, that means, that you created a million out of nowhere and passed it on to your ´subjects´. That extra million in currency would simply not exist without the debt. On the level of abstraction of the game, it is simply ´extra-money´ and what, if not that, should cause inflation?
The thought crossed me, that it could apply to the other end of the scale as well: If you stockpile money. But that is actually money taken out of circulation, hence not effective, and if anything should cause deflation. Only if too much of it is spent in too short a time, it could cause the contrary, i postulate...
So maybe it should be that: Money spent per time. Anyone remember the global warming meter of Civ1? Something like that would be neat. If you spent too much too fast it goes from green to yellow, then to red with increasing chances of inflation. If you spent too little, it goes the opposite direction and ´below zero´ changes form (say from circle to rectangle) and again from green to red with increased chance of deflation. Both events are bad, generally speaking, so you´d want to avoid them both and thus ´zerging´ (I hope the term kind of fits and you get what i mean) is discouraged. You´d want to spend the same this year as last, at least by order of magnitude, each year, roughly.