Vouchers an inflationary folly
The issuance of NT$85 billion [US$2.5 billion] in “consumer vouchers” into general circulation is simply printing money. On its own, the effect would be to devalue the New Taiwan dollars already in circulation by the same amount and give rise to inflation.
Economic growth demands a corresponding increase in money supply, but printing more money does not add one iota to GDP. Heck, if that were the case, why stop at NT$85 billion in consumer vouchers, why not print NT$850 billion’s worth and raise GDP by 6 percent? The answer, of course, is that this inflationary folly would then become obvious to all, rather like the billion-dollar banknotes being printed in Zimbabwe.
I suspect, however, that as the vouchers are redeemed, the central bank will quietly withdraw a like amount of NT dollars from the banking system to maintain equilibrium in the overall money supply. It would seem irresponsible not to do so.
The only question left is whether the people of Taiwan actually believe in a free lunch from the government. I somehow doubt it.
JOHN PICKLES
Taipei
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