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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: mishedlo who wrote (53457)2/14/2006 11:42:30 AM
From: gpowell  Read Replies (2) of 110194
 
When the FED increases money supply for a prolonged duration do you expect prices of goods, services or assets to in general rise?

If you really do follow Heinz, and he listens to Feteke, then according to their theories, the price level would never rise under a gold standard since the price of gold is constant at any rate of supply growth. Consequently, under a gold standard, price level determination is altogether disconnected from changes in the money supply.

Now from an Austrian economists point of view, if gold has this property then it comes from its use in exchange and not from any inherent properties of the commodity itself, since all commodities must obey the law of diminishing marginal utility. Consequently any exchange commodity will have the same potential, including a fiat currency. Thus according to Heinz, there is no connection between the price level and increases in the money supply.

Heinz post: Message 22162471
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