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The price of gold might have remained constant, but that's hardly the binding factor here. All inflation is measured with respect to a basket of goods and if yo
by rmc 14y ago
The price of gold might have remained constant, but that's hardly the binding factor here. All inflation is measured with respect to a basket of goods and if you choose "an ounce of gold" as your basket of goods then under a gold standard you'll get 0 inflation by definition.
Exactly. If you define a new basket of goods to be "one bottle of coca-cola" (let's call it's a "Coka"), then there has been no inflation since coke was first sold! One bottle of coke still costs the same as 1 Coka!
- rz2k 14y agoTo elaborate, it would be a basket of goods comprised only of Coke, measured using the Coka currency. It's something like ∂Coke/∂Coka, and historically when gold presumed to be a neutral measurement of value, the price of labor and the price of land still varied with respect to each other.
- cpeterso 14y agoI am reminded of The Economist's "Big Mac Index", comparing currencies' purchasing power to buy a Big Mac in different countries. The index "seeks to make exchange-rate theory a bit more digestible". ;) http://www.economist.com/blogs/graphicdetail/2012/07/daily-chart-17 http://www.economist.com/blogs/graphicdetail/2012/07/daily-c... https://en.wikipedia.org/wiki/Big_Mac_Index https://en.wikipedia.org/wiki/Big_Mac_Index