There are innumerable factors that can cause prices to rise or fall. Only one of them is a constant – government regulations that cause prices to rise. Even taxes go down, for a while, occasionally. New regulations never cease.
Every single piece of government regulation adds to the costs of business.
Regulation remorselessly drives business costs higher and, in consequence, consumer prices become higher than they would otherwise be.
Since Gold was withdrawn from circulation and replaced with paper money, governments have borrowed an ever-increasing quantity of these debt notes into existence.
A superficial inspection of that increase in ‘money’ supply, coupled with a graph of rising prices, has brought some to the false conclusion that it is the increase in the quantity of debt notes that brings about increases in prices.
It is an example of correlation not necessarily being causation.
The value of debt notes falls, not because the quantity is rising, but because the quality is falling. As the perception of quality falls, so people rush to exchange debt notes for anything that they can get their hands on.
What is the mysterious ‘quality’ that people demand of money? There is just one criterion – stability of value. It doesn’t matter how much money there is – as long as its value is trusted to be stable.
The victims of the Weimar hyperinflation desperately sought to exchange their Reichmarks for something, anything, that had a more stable value – even an armful of bed pans in one famous instance.
Throughout the whole of history, in all societies where money has circulated, no one has ever doubted the quality of a known weight and purity of that most stable of values – Gold.
Which smoothly leads into why those who define money as whatever is circulating as the medium of exchange are plain wrong. Just about anything can pass muster as a medium of exchange in the short term, including salt, cattle, salted fish and even paper debt notes; but only Gold has a stable value.
That is why only Gold is money.
That is why all pseudo monies eventually fail.