# Inflationary upswing (boom by inflation)

- Canonical URL: https://www.gerhardmerk.de/inflationary-upswing-boom-by-inflation
- Post ID: 587505
- Modified: 2023-07-25T21:01:55+00:00
- Language: en

## Definition

The assertion that a high rate of inflation can bring about an economic upswing. The wrong conclusion is drawn here: - in a crisis, aggregate demand collapses; this is because money is hoarded; - to boost aggregate demand, consumers must spend more money; - to get them to spend, the central bank should set a very high inflation target; as a result, households spend their money because it would lose purchasing power due to inflation, and more demand is created. - The later inflation would also have the advantage of lowering real wages when nominal wages are rigid, which stimulates employment. - In addition, a higher inflation rate also has the effect of reducing the burden of accumulated government debt. - This chain of thoughts is therefore wrong because it has been proven that the actual behavior of private households is different. In case of fear of inflation, people will switch to another currency - such as the CHF or USD - or buy gold and real estate. This promotes speculative bubbles, while consumer spending PER SALDO actually declines. - See inflation compensation, inflation expectations, inflation-growth relationship. Attention: The financial encyclopedia is protected by copyright and may only be used for private purposes without express consent! University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec. Professor Dr. Eckehard Krah, Dipl.rer.pol. E-mail address: info@ekrah.com https://de.wikipedia.org/wiki/Gerhard_Ernst_Merk https://www.jung-stilling-gesellschaft.de/merk/ https://www.gerhardmerk.de/

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