Re: 'Stability' Of Equilibrium w/Zero-Cost Money

["John O'Donnell" <jackodonnell@xxxxxxxx>]

Adam.Stokes@xxxxxxxxxxx wrote:
>
> If, occording to orthodox theory, fiat money has no impact on real resources
> (ie. it is neutral), and an increase in money will merely push up the
> 'price' of resources, how can orthodox theory justify the concern that
> inflation will interfere with the price mechanism? To do so would be
> assuming that the inflationary impact of increases in the money supply is
> NOT equally proportional between resources, which surely implies that there
> is a real impact (somewhere).

The error is in the assumption of "neutrality" not in the
obvious relationship dQ/dM = 0. The "somewhere" is the
effect of changing the quantity of money relative to its
demand has on its value. Attempting to cause useful economic
activity [or any reason other than to restore money value to
its targeted standard] only creates greater volatility in
its value which hinders the efficiency of exchange
engendered in its use.

<<SNIP>>
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			-- jbod

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