Inflation maybe needed to increase output

    Greater demand leads to higher prices which in turn lead to higher supply. If grain prices could be scaled back, farmers would also scale back on production which would lead to a shortage of grain. If grain prices were to be depressed, farmers would choose to grow something else instead. They would prefer to grow more of whatever it is that is inflating in price rather than something that remains stagnant in price.

  Whether consumers shoulder the higher price or the government shoulders the higher price is irrelevant so long as the farmers get their price. The government could buy the grain at 10  RMB from farmers and resell to consumers at 5 RMB, so long as the farmers get their price. The farmers need that price to encourage them to extend production.

  I am certain people are already familiar with why budget deficits do not matter, so that I would not need to explain it in every article.