Re: Should the money supply increase with volume of trade

mbarnett — Sat, 25 Jul 2009 12:43:30 GMT

The market should determine how much money exists; historically, the market has not seemed content with the quantity of money in existence and thus people sought to find new sources of gold and silver
(for instance). More money in circulation certainly facilitates exchange. We'd prefer if that money were generated by the market and not by the government printing presses.

Should the money supply increase with volume of trade

inquisitiveteenager — Sat, 25 Jul 2009 11:45:11 GMT

I know the answer is no. I just want to know if there is any 'proof' to show why it is wrong.

I thought of a 'proof', tell me what you think:

I am trying to prove that the statement 'the money supply should increase with the volume of trade' is wrong and that the logic behind it falls to its knees.

Let's assume this is true, how would you know when to print money? According to advocates of the view whenever there is more trade.

But wait a second, if there is more trade doesn't this defeat the statement that 'trade can't be expanded under a gold standard'.

The reason they say the money supply should be increased is to allow trade and if it has to increase by the rate of growth then that itself proves the money supply does NOT have to increase.

To measure a change in growth, you have to have growth and therefore no new money is needed otherwise what facilitated THAT growth n trade? Only the existing money could have.

I HOPE i haven't confused anybody and I hope you get what I mean. My vocabulary is not big enough to

articulate my ideas well.

Economics Questions

Re: Should the money supply increase with volume of trade

Should the money supply increase with volume of trade