Much of the money that is collected for the public purse comes from taxation. However the slump has resulted in less macro-economic activity of the kind from which these taxes are usually raised. Consequently in matters of national finance there is also a shrinking of available funds. The Government badly needs to help itself as well as the whole social system, to escape from the effects of this national depression.
3. DISCUSSION ATTEMPTS TO OVERCOME THESE FOUR MAJOR DIFFICULTIES
"Business cycles" of this kind are not new to our society. Various suggestions have previously been made about what a Government should do to reduce the adverse effects of slumps. The following proposals and discussions about them are presented from a holistic Finance-Ministry (or Treasury) viewpoint, where the complete system is considered taking into consideration all of the affected parts, as taught by Henry Hazlitt [2]. Various attempts to restore the macro-economy are examined below, passing from what appears to be the obvious remedy, up to some more-complicated solutions.
3.1 Call for Price Reductions and Price Controls
Usually there is a delay until the depression is recognized by the Government. The reasons for this are purely political, but as soon as it is official the first Government response is to call for a reduction in the prices of commodities. This is followed by the imposition of price controls to fix the amount charged for the more basic consumer goods, with some of them being subsidised. In fact, many of these prices have already been cut, due to the reduced demand and the need for the smaller businesses to compete and remain viable. Some of the monopolistic concerns, particularly those partly owned or controlled by the Government, need to receive formal notice before their bureaucratic systems of organization can make these changes. The effect of the lower prices is to increase the quantity of goods being consumed, which has a small positive effect on the employment figures. But for this type of commerce, the amount of money in circulation scarcely increases, so this change does not directly result in a significant improvement in the value of goods traded within the macro-economic system.
Lower prices do ease the pensioner's problem to a degree, although nothing more is done for them and much harm may yet be caused to their savings.
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