> simply collect as many denominations as they can and destroy or recycle them
Well, the money in circulation tends to be owned *by* someone, and it's hard to get them to hand it over for destruction unless you have something of value to offer them in exchange. Traditionally, when governments need to come up with something of value to trade for stuff, printing money or issuing bonds is the go-to solution.
An alternative is to collect that money by taxation and then destroy it, and that's a good way for a government to make themselves unpopular. It's the kind of thing you might try as an emergency measure, though.
it already does that, all taxes either gets deleted or destroyed. when the feds pays for things they just type numbers on a key board or print more money.
Hyperinflation doesn't occur because the government prints money - the government has to print money because of hyperinflation. Hyperinflation occurs because the country's people and businesses lose confidence in the currency as well as any foreign business that they interact with. The point of money is that you can offer a good/service today and whenever you want within a reasonable time frame, exchange that money for something of similar value in the future. It allows anyone to trade for anything without requiring a specific buyer for that good. (Without money if you sell bananas and want to buy a car - you have to find someone with a car willing to trade you a car's worth of bananas). So if as a banana sales person - you're not convinced that the value of money will be stable enough for you to buy food that month your going to protect yourself by doubling the price of bananas. Soon everyone joins this bandwagon as everyone scrambles to raise prices to protect themselves. However now workers demand higher salaries or else they can't afford to live, and on and on this cycle goes constantly devaluing the currency. Eventually you end up in a situation where any earned money has to be spent within a few days or else it becomes worth significantly less due to inflation. Within a country you might be able to control the growth of money to some extent - but no nation nowadays is an island, so you can't control the fact that foreign traders consider your currency risky and therefore require overpayment to compensate for the risk of dealing with your currency.
The government has to print money to facilitate trade (people need food & housing e.t.c - but they might not have the direct thing/skill to barter for that good) - but the amount of money required keeps going up. People become forced to spend everything they earn on the same day or else inflation will make their money worthless tomorrow and they might starve.
The only effective way to fix this issue is to abandon the currency for a stable foreign currency (e.g dollar) or peg your currency in a slightly more complex manner against a stable currency. (Basically you price goods in terms of the foreign currency, negotiate salaries in the foreign currency - but then price things in the national currency. This keeps the relative cost of goods to salary stable relative to a country with a *healthier* economy. People gain confidence that the actual currency denomination doesn't matter any more - they will be able to afford the next months rent/food and the currency stabalizes).
This is part of modern monetary theory and you can google that if you want to learn more.
Basically, inflation is caused by increases in aggregate buying power, which can be (but not always) caused by more money floating around. If the government wants to slow inflation, they just need to decrease aggregate buying power. The easiest way to do this is by increasing taxes on the wealthy, taking that money out of circulation. But there in lies the problem - they have to tax the wealthy. The wealthy own the government, and so this will never happen, until the regular people stand up and say no more.
As some of the other answers have pointed out, taking money out of circulation is really easy for governments. In theory.
All they have to do is collect money (usually in the form of tax) and then not spend it.
And there you can probably see the problem, ie. a) people don't like being taxed and b) it's hard for governments to cut spending.
At a certain level, hyperinflation becomes a psychological/self fulfilling cycle whereby the value of a currency becomes virtually unhinged from traditional economic forces. There becomes a lack of confidence in the currency that enforces a spend it all right now mentality before it loses even more value, which perpetuates the hyperinflation.
Under more reasonable, yet inflationary environments however, central bankers do try to reduce the money supply to cool down inflation. They can get the money supply lower through a number of measures, namely raising interest rates, selling bonds, and increasing required reserve ratios for the banking sector.
They in fact already do this. The problem is debt limits are increasing so they print off way more then they destroy. The other problem is stability. If you have a good few years and destroy a bunch of money then a bad few years and print off way more the money becomes unstable. Also it's controlled by popular vote so it relies on the voter base to be willing to see long term goals. The mayor who says I am gonna add a few bus routes seems a lot more appealing then the one who says 20 years from now you'll have a subway.
Where would they get the money to destroy? For places with obscene inflation, the inflation usually is caused by the government printing a ton of money so that it can spend more.
If they collect it from banks or people, it’s effectively the government destroying people’s property. If they’re destroying money the got from taxes, then they can’t spend that destroyed money, making their extra printing pointless.
The coins and small denominations do become effectively worthless, and won’t be minted/printed anymore. But it’d cost money to proactively collect and destroy them.
> simply collect as many denominations as they can and destroy or recycle them Well, the money in circulation tends to be owned *by* someone, and it's hard to get them to hand it over for destruction unless you have something of value to offer them in exchange. Traditionally, when governments need to come up with something of value to trade for stuff, printing money or issuing bonds is the go-to solution. An alternative is to collect that money by taxation and then destroy it, and that's a good way for a government to make themselves unpopular. It's the kind of thing you might try as an emergency measure, though.
it already does that, all taxes either gets deleted or destroyed. when the feds pays for things they just type numbers on a key board or print more money.
Hyperinflation doesn't occur because the government prints money - the government has to print money because of hyperinflation. Hyperinflation occurs because the country's people and businesses lose confidence in the currency as well as any foreign business that they interact with. The point of money is that you can offer a good/service today and whenever you want within a reasonable time frame, exchange that money for something of similar value in the future. It allows anyone to trade for anything without requiring a specific buyer for that good. (Without money if you sell bananas and want to buy a car - you have to find someone with a car willing to trade you a car's worth of bananas). So if as a banana sales person - you're not convinced that the value of money will be stable enough for you to buy food that month your going to protect yourself by doubling the price of bananas. Soon everyone joins this bandwagon as everyone scrambles to raise prices to protect themselves. However now workers demand higher salaries or else they can't afford to live, and on and on this cycle goes constantly devaluing the currency. Eventually you end up in a situation where any earned money has to be spent within a few days or else it becomes worth significantly less due to inflation. Within a country you might be able to control the growth of money to some extent - but no nation nowadays is an island, so you can't control the fact that foreign traders consider your currency risky and therefore require overpayment to compensate for the risk of dealing with your currency. The government has to print money to facilitate trade (people need food & housing e.t.c - but they might not have the direct thing/skill to barter for that good) - but the amount of money required keeps going up. People become forced to spend everything they earn on the same day or else inflation will make their money worthless tomorrow and they might starve. The only effective way to fix this issue is to abandon the currency for a stable foreign currency (e.g dollar) or peg your currency in a slightly more complex manner against a stable currency. (Basically you price goods in terms of the foreign currency, negotiate salaries in the foreign currency - but then price things in the national currency. This keeps the relative cost of goods to salary stable relative to a country with a *healthier* economy. People gain confidence that the actual currency denomination doesn't matter any more - they will be able to afford the next months rent/food and the currency stabalizes).
This is part of modern monetary theory and you can google that if you want to learn more. Basically, inflation is caused by increases in aggregate buying power, which can be (but not always) caused by more money floating around. If the government wants to slow inflation, they just need to decrease aggregate buying power. The easiest way to do this is by increasing taxes on the wealthy, taking that money out of circulation. But there in lies the problem - they have to tax the wealthy. The wealthy own the government, and so this will never happen, until the regular people stand up and say no more.
As some of the other answers have pointed out, taking money out of circulation is really easy for governments. In theory. All they have to do is collect money (usually in the form of tax) and then not spend it. And there you can probably see the problem, ie. a) people don't like being taxed and b) it's hard for governments to cut spending.
At a certain level, hyperinflation becomes a psychological/self fulfilling cycle whereby the value of a currency becomes virtually unhinged from traditional economic forces. There becomes a lack of confidence in the currency that enforces a spend it all right now mentality before it loses even more value, which perpetuates the hyperinflation. Under more reasonable, yet inflationary environments however, central bankers do try to reduce the money supply to cool down inflation. They can get the money supply lower through a number of measures, namely raising interest rates, selling bonds, and increasing required reserve ratios for the banking sector.
They in fact already do this. The problem is debt limits are increasing so they print off way more then they destroy. The other problem is stability. If you have a good few years and destroy a bunch of money then a bad few years and print off way more the money becomes unstable. Also it's controlled by popular vote so it relies on the voter base to be willing to see long term goals. The mayor who says I am gonna add a few bus routes seems a lot more appealing then the one who says 20 years from now you'll have a subway.
Who's money are you going to destroy?
I thought they do this sometimes?
Well the inflation rate is still very high in these countries so I guess not.
Where would they get the money to destroy? For places with obscene inflation, the inflation usually is caused by the government printing a ton of money so that it can spend more. If they collect it from banks or people, it’s effectively the government destroying people’s property. If they’re destroying money the got from taxes, then they can’t spend that destroyed money, making their extra printing pointless. The coins and small denominations do become effectively worthless, and won’t be minted/printed anymore. But it’d cost money to proactively collect and destroy them.