Tuesday, January 8, 2013

I still have trouble explaining to others that population growth, or foreigners don't cause inflation over time.

If population growth causes inflation, prices of goods measured in terms of gold would have sky-rocketed in the past few centuries. But what we see is a general decrease in prices of goods in terms of gold. 

Population growth causes price to fall because more people are producing more stuff. It's only when you measure prices in terms of paper money that they have increased rapidly. The very simple reason is that rate of money printing >>> rate of goods production.

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