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Ok, so you subscribe to the notion that price increases equals "dollar inflation" The fallacy in your thinking is that because prices increased, dollars were "

Ok, so you subscribe to the notion that price increases equals "dollar inflation" The fallacy in your thinking is that because prices increased, dollars were "inflated" vs. gold, in which prices would have otherwise remained fixed. But the gold supply increased dramatically over the same period. As you point out prices increased ~75%, but at the same time US gold reserves increased nearly 3x. 2293 tons in 1913 vs 6358 tons in 1930: http://i.imgur.com/Sy8uzSQ.png http://i.imgur.com/Sy8uzSQ.png Remember, the Fed still had a gold reserve ratio it was required to maintain. So as the money supply increased, so did its gold supply. You might seem to imply that the reserve ratio was getting smaller and smaller as part of "dollar inflation" evidenced by price level increase, while gold had a fixed quantity and value. This is not the case.

WalterBright 13y ago
The value of gold is not determined by the quantity the Fed has. The global supply of gold did not increase 3x. The Fed kept a fixed exchange rate for gold, while inflating the currency supply. As I said, such pegged systems inevitably result in a sharp correction.
- nerfhammer 13y ago
  > The global supply of gold did not increase 3x. The government's gold reserve increased 3x. > The Fed kept a fixed exchange rate for gold, while inflating the currency supply. "inflating" the current supply of what? dollars? As noted the reserve ratio did not decrease. As there were more dollars there was more gold backing it.
  - WalterBright 13y ago
    The global supply of gold determines its value, not the supply one entity has.