I don't think the money supply will shrink at a rate that has any significant impact. Maybe it will increase deflation from 5% to 5.1% annually. It's money - pe

I don't think the money supply will shrink at a rate that has any significant impact. Maybe it will increase deflation from 5% to 5.1% annually. It's money - people don't like to destroy money. There's a natural incentive to keep it. :) The problem with having a mechanism to adjust the money supply in proportion to economic growth is that someone has to make those decisions, and historically they have ALWAYS ended up abusing that privilege. Currently we have representatives of banks, hedge funds, and investment trusts making those decisions. Who's interest do you think are reflected in monetary policy?