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In practice, price and wage controls have almost always been used as a substitute for, rather than a complement to, measures of monetary and financial restraint. This experience led market participants to regard the imposition of price and wage controls as a signal of rising rather than falling inflation, leading them to project higher rather than lower inflation. Price and wage controls often seem to be effective for a short time after they are imposed. On the surface, the list price, that is, the price that is included in the price index, is depressed,ultrasonic dispersion machine, while in the dark, people indirectly raise prices and wages-such as reducing the quality of products, eliminating maintenance services, upgrading workers,ultrasonic emulsifying machine, and so on. But when these easy ways of circumventing regulation were exhausted, the price structure was distorted more and more, and the pressure of regulation reached boiling point, the adverse effects became more and more serious, and finally the whole plan collapsed. The result is to increase inflation rather than reduce it. Looking back on the history of four thousand years, there is no time when price and wage control has not been caused by the shortsightedness of politicians and voters. ① ① Robert l. Schuttinger and Eamon f. Butler : Forty Centuries of Wage and Price Control (Washington, D.C.: Heritage Foundation, ultrasonic dispersing machine ,ultrasonic sonochemistry machine, 1979). Case study Japan’s recent experience provides an excellent example of a cure for inflation. As can be seen from Figure 6, in Japan, the money supply began to increase at a faster and faster rate in 1971, and by mid-1973, the annual growth rate reached more than 25%. ① Reason: a policy of trying to maintain a fixed exchange rate of the Japanese yen against the US dollar. The yen is under pressure to appreciate. To counter this pressure, the Japanese authorities used the newly created yen to buy dollars, thereby increasing the money supply. In principle, they could have offset the increased supply in other ways, but they didn’t. The corresponding inflation did not occur until about two years later, at the beginning of 1973. The subsequent sharp rise in inflation led to a fundamental shift in monetary policy. The focus shifted from the yen’s foreign value-the exchange rate-to its domestic value-inflation. Monetary growth has been sharply curtailed from over 25% to between 10 and 15% per annum. This has been maintained for five years, with minor exceptions. Because Japan’s economic growth rate is very high, keeping the monetary growth rate within this range can keep prices basically stable. In the case of the United States, the rate of money growth that keeps prices stable is 3-5%.) About eighteen months after the rate of money growth began to fall, the rate of inflation also fell, but it was not until two and a half years later that it fell below double digits. Subsequently, the rate of inflation remained largely stable for about two years — although the rate of monetary growth increased slightly. Then, with the new decline in the rate of money growth, the rate of inflation begins to move rapidly toward zero. The inflation figures in the chart are based on consumer prices. Wholesale prices fared even better. Wholesale prices actually declined after the middle of 1977. After the war, Japanese workers moved from low-productivity sectors to high-productivity ones, such as car manufacturing and electronics, which meant that the price of services rose faster than the price of goods. As a result, consumer prices have risen relative to wholesale prices. After Japan slowed down its monetary growth rate, its economic growth rate declined and its unemployment rate rose,ultrasonic welding transducer, especially before the 1974 inflation rate had responded significantly to the slowed monetary growth rate. Then production began to recover, and then growth-at a slower rate than during the boom years of the 1960s, but still respectable: more than 5% a year. Price and wage controls were never imposed in Japan as the inflation rate fell. Japan is adjusting to higher oil prices at a time when inflation is falling. Conclusion. fycgsonic.com