I have to take issue with this statement:

“when there are idle resources (such as unemployed labour and machines), an expansion of nominal spending will likely be mostly absorbed by higher production (real output) and firms will be highly reluctant to try to increase prices for fear of losing market share to other firms in the sector.”

That may be the result initially, but shortly thereafter most likely nearly all businesses will inflate their prices…because as Minsky correctly observed “the fundamental direction of capitalism is up” and who and what is to stop them from doing so?

Now this is certainly not an argument for the idiocy of austerity and the further rule of the business model of Finance over every other business model and 95% of the general population. What it is, is an argument for the intelligent policy of a reciprocally gifted (first to the consumer and then back to the merchant) discount substantially higher than any rate of inflation at the point of retail sale which would be

1) irresistible to every enterprise,

2) would not be intrusively stupid because the discount would not be implemented until AFTER the enterprise’s best competitive price was discovered at the terminal end of the entire productive process which is point of retail sale,

3) democratically increase aggregate demand

4) be price deflationary and yet fit seamlessly within profit making systems

5) severely reduce the dependence of both enterprise and the individual on the Banking and Financial systems whose utterly idiotic monopoly on credit creation, claim to ownership of that credit despite the fact that they create it out of nothing and whose 5000 year old problematic status is way over due for terminal correction.

NW:  “who and what is to stop them from doing so?”

Competition.

IF a firm raises prices, then it will lose out in competition to a firm that pushes volume and maintains prices

Me:  Well there’s the competition for market share and then there’s the impulse to profit….which every enterprise has, and within the latter more basic impulse you will find that an enterprise seeing another enterprise raising its prices will tend to match it, not via collusion, but because in an environment of perceived high level of demand it’s a doable thing with little or no market loss consequences.

If, however, you had a retail discount of sufficient percentage, say 40% and up, all of which was rebated back to participating merchants, it would render petty and creeping inflation impossible, make it more visible to consumers and likely discourage it altogether despite the increase in purchasing power because profits from volume of sales would rise.

And, if an enterprise was a serial inflater of its prices without real cost accounting cause, gracious and yet hard and fast consequences like taxation and/or loss of discount privileges in addition to loss of market share could be regulatory policy options.

M:  we have 35 years of down, and falling global inflation, and we may be about to enter a period of widespread deflation, unless some bright spark decides to turn one of our current small wars into a large one

Me:  It is correct that helicopter money is not INHERENTLY inflationary. The economy as a whole however IS inherently cost inflationary by the cost accounting convention that all costs must go into price. This may be galling to those who are hung up in general equilibrium theory, “hard money” beliefs and even left leaning economists like Steve Keen whose “emergent qualities” are actually just the failure to observe and account the moment to moment rate of flow of total individual incomes in ratio to total costs accurately. And if the system IS inherently cost inflationary in this manner, then injecting money into it in any way that doesn’t immediately reverse this ratio (classical notions of equilibrium are just another orthodoxy to overcome) and make it “the higher disequilibrium” that sets both the individual and the system free and rectifies the long standing unethical dominance of the business model of Finance….misses the mark.

NW:  “and within the latter more basic impulse you will find that an enterprise seeing another enterprise raising its prices will tend to match it,”

They won’t in a sufficiently competitive market. If that happens, then you have a problem with competition and need more of it in that market segment. So at that point you start breaking up firms, and introducing competitors *including government funded ones*. And most importantly you let market participants know that is what the government will do if it sees price rises and that the government expects to see quantity responses to increased demand, not price responses.

Then you will get a quantity response to maintaining profits, not a price response.

Me:  Yes, well that’s the orthodox explanation/justification. But orthodoxy as we see is not always accurate. But let’s suppose what you say is correct. What do we do about:

1) the almost complete dominance of the economy and nearly everyone in it by Finance
2) the fact that the cost accounting convention that all costs must go into price which means that the additional costs of depreciation and waste as a flow as well as the increasingly disruptive forces of innovation and AI on aggregate demand are making modern capital intensive economies price inflationary

NW:  No, that’s how businesses actually work internally when you work in them. Prices aren’t set by accountants. They are set by businessmen based upon what they can get for their product pretty much regardless of the costs. There is no guarantee that the markup you want for your product is what you are going to get and it is the job of the government to contain capitalism in a competitive environment that keeps that uncertainty going – largely by ensuring that those who raise their prices have a tendency to go to the wall.

Me:  “No, that’s how businesses actually work internally when you work in them. Prices aren’t set by accountants.”

Precisely….and devastatingly for both the system and the individual that the businessmen are so unaware of the economic and monetary significance of cost accountings’ conventions…..and accountants aren’t mathematically trained to do calculus with the datums they work with constantly. If it weren’t so tragic, it would be hilarious.

What you say is undeniably how business decisions actually are made, and there are undoubtedly legitimate temporal reasons for that, but if there is an underlying and ever present inherent cost factor still de-stabilizing the system….then the analysis is incomplete. Integrate truths and relevancies. That is the process of Wisdom whether it be personal or economic and monetary.

Me:  @Neil and Mahaish

You’ll note that the problem I’m referring to is a systemic/macro-economic inherent state of a continual scarcity ratio of total individual incomes to total costs that drives and necessitates the build up of debt in order to palliate but not resolve that scarcity ratio,…..not the micro-economic decisions and policies of individual enterprises.