OK, and now we come to the crux of the matter. BTW, I am not trained in economics (beyond Macro and Micro undergrad) and don't subscribe to any particular theory as far as I am aware.
I contend that even if we all woke up this morning being able to buy the same number of Big Macs (I prefer Whoppers, myself) as we did when we went to sleep, that will not be true when we go to bed tonight. The number of potential Big Macs we can all buy will be probably higher because we will have created new value during the day through our industry, just as we do every day. The demand for Big Macs will probably be greater because there are more people being born every day, some of whom will want Big Macs.
We are assuming, I think it's necessary, that the number of ounces of gold held in reserve will not change. And just to make it easy let's pretend we are on another planet or some other closed system so when we woke up this morning the price of a Big Mac in relationship to gold was one gold backed dollar.
We grew new wheat, we made new flour, new calfs were born, so even though many Big Macs were consumed, there are more available.
If there was an outbreak of disease and half the cows died, then tomorrow Big Macs will cost more.
If there was a bumper crop of cows, then tomorrow Big Macs will cost less.
The ratio of gold-to-Big-Mac will always change, and as you have suggested, it will also change depending on whether I want a Big Mac or don't. If everyone becomes vegetarians, there will be no market for Big Macs at all.
No force on earth can keep the ratio of gold-to-Big-Mac stationary.
Agreed? |
