There is a profound difference between what something is worth and its price. Value is similar to worth up to a temporal constant. What is the value of air? Invaluable. What is its price? Unvaluable.
When the cost of a core component of production which is found in all goods produced like the component, oil, rises, the cost of the good rises commensurately. The price of oil rose during the '70s by a factor of ten. So did most goods. Since then they have doubled, but oil has fallen. Value and price are out of sorts. That will be corrected by the temporal constant which is running at $1/mo and should reach equilibrium where value and price will be commensurate in 1 year. ($30/bbl. Stuff it, Rothbart)
Yes. I knew you didn't give a precise definition of money availability, so I gave it the one you actually mean. If you were in Japan, then the Austrian School economics would be strictly applicable since they have a greater predilection for free market capitalism. We have here what Samuelson called, "the mixed-up economy", and that means a little socialism and a little capitalism and everyone is happy. But it also means that the way supply of money interacts with economy is intimately linked with strictly economic factors. In the US the supply of money is connected to goods output by money's cost. That isn't so much the case in Japan. Here, it is the cost of money below its demanded cost which creates excess supply of money. The FED fixes the price of money below its cost and so money supply grows faster than output. It is this mechanism that emboldens the UAW to go for the jugular and force all the caring citizens in for their fair share.
Increasing the supply of gold does not cause inflation. Neither does excess money supply! It is quite possible to have rising money supply and falling money availability as though interest rates were rising. We actually saw that last fall. Money supply rising rapidly but banks refusing to loan because they were scared. You can have rising inflation and declining money supply. This was experienced abundantly during the '70s. And gold has nothing to do with inflation because it is the measure against which those things inflating are gauged. Further, gold doesn't serve as a basis for currency inflation unless the central bank chooses to use increased gold supply as a rationalization to print currency. Even then other factors have to be in place for the economy to be amenable to inflation.
The central banks must be working for us since none of the bankers are around long enough to sway things much in any direction. They always reflect the will of the people. It is the people that cause the inflation. That's what is happening now. The FED is allowing some of the people to use their monopoly power to commandeer economy. FED will let this go on for a while and then they will have to bust the whole damn deal into the Stone Age. We hire them to let us go on an orgy, so if we don't like the outcome, we had better change our attitudes.
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