Double the quantity of money, and, other things being equal, prices will be twice as high as before, and the value of money one-half. Halve the quantity of money, and, other things being equal, prices will be one-half what they were before, and the value of money will double.
That an increase in quantity tends to lower value, is a proposition holding good of all commodities. The special proposition concerning money is that its value tends to vary precisely in proportion to its quantity. This constant relation does not hold good of any other commodity. Double the quantity of wheat, and its value will probably fall to much less than half of what it was before. Double the quantity of sugar, and its value will probably fall by no means to one-half. For both wheat and sugar, the outcome will depend on the elasticity of demand. But in the case of money, there is no question as to elasticity of demand and no such difficulty in prediction. The value of money, under the simplest conditions, is exactly inverse to its quantity.
There is no such thing as inflation-safe money. All media of exchange are relative in value to what they will buy and to other countries’ currencies.
While the quantity of money in circulation is one factor affecting the value of the dollar, that is not by any means the sole factor, nor is value inverse to quantity.
Conservatives want nice, easy answers where none exists. This is why the economy withers under Republican rule.
Double the quantity of money, and, other things being equal, prices will be twice as high as before, and the value of money one-half. Halve the quantity of money, and, other things being equal, prices will be one-half what they were before, and the value of money will double.
That an increase in quantity tends to lower value, is a proposition holding good of all commodities. The special proposition concerning money is that its value tends to vary precisely in proportion to its quantity. This constant relation does not hold good of any other commodity. Double the quantity of wheat, and its value will probably fall to much less than half of what it was before. Double the quantity of sugar, and its value will probably fall by no means to one-half. For both wheat and sugar, the outcome will depend on the elasticity of demand. But in the case of money, there is no question as to elasticity of demand and no such difficulty in prediction. The value of money, under the simplest conditions, is exactly inverse to its quantity.
Comment by grimgold — April 27, 2008 @ 7:52 pm
There is no such thing as inflation-safe money. All media of exchange are relative in value to what they will buy and to other countries’ currencies.
While the quantity of money in circulation is one factor affecting the value of the dollar, that is not by any means the sole factor, nor is value inverse to quantity.
Conservatives want nice, easy answers where none exists. This is why the economy withers under Republican rule.
Comment by Peregrin — April 28, 2008 @ 1:31 am
Conservatives want nice, easy answers where none exists. This is why the economy withers under Republican rule.
After a nasty and incorrect comment like that how about some answers from you… Oh you don’t have any?!? I’m not terribly surprised.
Comment by grimgold — April 30, 2008 @ 9:01 am