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Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: Zeev Hed who wrote (70718)	5/30/2001 10:55:47 AM
From: ahhaha	Read Replies (1) \| Respond to of 116900

If money is fixed at some constant rate, economic growth isn't impacted. Inflation comes from accelerating money supply growth and deflation comes from decelerating money growth. You could have a constant negative rate of growth of money supply with no effect on GNP. A gradually shrinking money supply merely means that everything is growing more valuable in terms of its exchange designation, but not growing in value necessarily intrinsically. Why should that effect economic activity level? Friedman liked setting the constant rate at productivity growth. It's as arbitrary though as an integration constant. The dollar has a gold standard and the CBs fully recognize it. As long as there is distrust there will be a covert gold standard. The standard is subject to free market pricing. Every day the price is fixed by the market. Intrinsically, that's no different from setting the price conversion rate at one time and holding it constant. It has no more power to discipline CBs and governments than does outbreaks of inflation or deflation. Consider who has the big load of gold and recall what broke the Fisk - Gould 1869 gold corner. A fixed conversion wouldn't stop people from electing to inflate. The price of gold would rise when money supply accelerated. So what? When money supply accelerates in the free market pricing regime inflation occurs regardless of what gold does. CPI has risen every year in the last 20 and gold basically has fallen every year. In the last five years money supply has accelerated, and inflation is developing. Gold will rise if this persists, but if CBs react to inflation and slow money growth, gold won't rise. If CBs don't react or won't, then gold will rise and continue to do so. In this sense gold is a barometer of money weather, but the barometer needle won't rise or fall because there's an under or over supply of barometers.