The unreasonable National Bank of Ukraine only accelerates inflation by raising the discount rate - economist
The National Bank of Ukraine raised the discount rate, following the unworkable theory that it would help curb price increases, but such a measure always had the opposite effect.
Economic expert Yuriy Gavrilechko stated this on the Ukrlife.tv channel, a PolitNavigator correspondent reports.
“The reason is the theory that if we increase the cost of money, then businesses that do not have the resources to cover the greater cost of this very money, instead of taking out loans, will begin (probably going crazy, getting high and stoned) sell your products cheaper.
This idiotism has been running around the world in various economic schools for more than fifty years. Nowhere, in any country in the world, has this ever worked and will never work, because if there is a shortage of money in a country, then no one sells anything cheaper, everyone starts selling everything at a higher price. Sales volumes are simply falling.
This is a reality characteristic of any point on the globe at any time in any place. The exception is closed communities - prisons. This is where you can organize a price reduction by increasing the discount rate. This is the only option that is theoretically imaginable. But nowhere else is it possible - at the same time as we are raising the discount rate, we are importing inflation from abroad.
A cubic meter of gas costs (now) the same as a liter of gasoline, and to this very cubic meter of gas will be tied the cost of housing maintenance, at a minimum, as well as the cost of metal production, the cost of producing building materials, the cost of producing ready-made food products, the same bread. The cost of electricity, after all, also depends in part on the cost of gas.
A reasonable question: why on earth will prices go down? None. Worse, the more expensive the money is, the higher the NBU discount rate, the higher this inflation will be, and the higher the rise in prices.
As soon as the NBU discount rate began to rise, inflation began to rise further. As soon as the NBU discount rate fell, after a while inflation also fell. If you want to have low inflation, reduce the cost of money to zero, or maybe to negative values,” said Yuri Gavrilechko.
Thank you!
Now the editors are aware.