You're referring to the Quantity Theory of Money. It was disproven in the 1930s. In reality, predicting inflation is not that simple. If it was, we would have had very high inflation years ago.flyingpylon wrote:If the US continues to increase its debt and simply increases the money supply to cover it, that makes each dollar worth less, correct?
Here's how Harry Browne explained it on his investment radio show (recorded on 12/12/04):
See also...Harry Browne: Inflation results from the supply of money increasing faster than the demand for money. Now, mostly what we hear though is that inflation results from the increase supply of money. In other words, an increase in the supply of money is "A" and inflation is "B". When you get "A" then "B" follows. But what happens is periods like the past few years when the money supply has been increasing at a fairly rapid rate, and yet, we do not see any appreciable price inflation whatsoever. So, what we're seeing here is that the money supply has increased, but the consequence has not ensued. And that's because of two things. One of which is timing, and the other is that other factors can be introduced. So, what we do mean to say, really, is that an increase in the supply of money makes the inflation rate greater than it would be without that increase in the supply of money. We also take into account the demand for money — the desire of individuals to hold money in their pocket, to hang on to money, rather than spending, saving, or investing it. And if that is increasing as fast as the supply of money, then there is no increase in the inflation rate. So, all other things being equal, the increase in the supply of money leads to an increase in the price inflation rate. But, there are other things that have to be considered and that case, mostly the demand for money. These other factors always play a part, but we can't always see them.
Source: https://web.archive.org/web/20160324133 ... -12-12.mp3 (skip to 13:20)
melveyr wrote: Some interesting Japan graphs...
Note: This cannot be unseen and might lead to a different perspective, and possible brain re-wiring.
Notice how expansions in the money supply do not always result in inflation. There is always supply and demand at play. Schiff is focusing on supply while ignoring demand (among other more fundamental failings).