Government's playbook for inflation and price controls for the rest of this decade is now revealed through the 32nd Annual Report of the Board of Governors report. The report revealed how the government was trying to fight inflation caused by the massive increase in currency supplied due to borrowing from the banking system. Borrowing from the banks created new supplies of money in the country's monetary supply leading to inflationary pressures which can devalue currency and decrease purchasing power.
To fight this, the government resorted to taxes and price controls as the primary tools. Higher taxes and price controls were initiated to decrease the amount of currency in circulation. Creating a surplus for the government, which they used to pay down existing debt, was another tool to decrease the amount of currency in circulation. However, it was not successful in bringing the money supply back down as the M2 money supply in the 1940s went up significantly.
Fast forward to the 2020s, it can be noticed that the government created the exact same situation that it did in the 1940s. Therefore, it is likely that the government's playbook for the rest of the 2020s will be the same. The playbook will include higher taxes and price controls to decrease the amount of currency in circulation. Higher taxes can be argued as necessary for wealth redistribution and to combat inflation while price controls will eliminate greed and halt inflationary pressures. This playbook has already been executed in the 1940s and most likely will be executed again in the 2020s.
However, inflation does not go up in a straight line. The disinflationary pressures caused by black swan events, financial crisis, or the next wave of banking system collapsing are deflationary pressures that puts downward pressure on prices. In times like these, the government's response will be to increase taxes and redistribute income to combat inflationary pressures, thus potentially leading to the next wave of inflationary pressure. The government will use UBI as an example of drawing down the amount of currency in circulation by running a surplus.
Overall, the playbook for the government's plan for inflation and price controls for the rest of the 2020s has been revealed through the report of the Federal Reserve in 1945. The report reveals the government's primary tools as higher taxes and price controls to decrease the amount of currency in circulation while creating a surplus for the government to pay down existing debt.
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