When our economy was on the gold standard, the amount of gold dictated the supply of money. The U.S. abandoned the gold standard in 1971, yet money is still valuable because there is a limited supply of money and it is accepted as a means of exchange.
In reality, the monetary base is our money. The Monetary Base is the amount of currency and reserves at the Federal Reserve Bank (FED). Only the FED can change this base, and just like the amount of gold determines the level of prices on a gold standard, the size of Monetary Base determines our prices level.
During a Cato Institute podcast on 12/9/08, economist Lawrence H. White noted that the Monetary Base has more than doubled in the last year!
More than doubled! In some settings, wouldn't this double prices (like in MV = PQ if V, and Q are unchanged)? Am I missing something?
- ► 2009 (71)
- I told you the money supply doubled!
- The Money Supply Has Doubled!
- Thoughts on Austrian Economics
- Michael Pollan Stars in Atlas Shrugged
- Unintended Consequences
- Saving for Retirement
- Put your money under the mattress
- Wealth of Nations: Part 1
- Can Obama Create Jobs?
- Understanding Exchange Rates
- Worst Intro Ever
- Best Economic Quote Ever
- I have this friend, who...
- New Era of Ag Econ
- Finance and the Macro
- We are finally saving more money
- The Importance of California for Animal Rights Mov...
- Pilgrim Socialism
- I Hate Aggregate Supply / Demand
- Blog Medley
- What OK College Kids Listen To
- Making Fun of Students
- Smoke'em if you got'em
- Blogs are awesome, and prestigious
- Unemployment During the Great Depression
- ▼ December (25)