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Old 10-20-2007, 10:30 PM
Copernicus Copernicus is offline
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Join Date: Jun 2003
Posts: 6,912
Default Re: If the Gold standard came back ...

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He has all the necessary knowledge to get it right, lays it out for you, puts it in the correct order even... and then just misses it. If M, V and P are held constant then Q cannot grow, but deflation is a decrease in P, which is on the same side as Q so a decrease in P leads to an increase in Q!

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Deflation is a decrease in M, not a decrease in P.

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If you are talking about deflating the money supply then it is, but under a gold standard the money supply would be relatively stable no?

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No, the money supply is relative to the total amount of goods and services you can buy with that money. Increasing that while keeping the same number of dollars is a drop in M.

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Uhhh no. M is the currency in circulation as defined by M1, M2, M3. It is an absolute number, not relative to anything.
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