Fiat Money Quantity
In
this paper Alasdair Macleod introduces a concept he calls Fiat
Money Quantity. He considers this to be a better measure of the
quantity of money outstanding. Monetarists subscribe to the
quantity
theory of money, that holds that the quantity of money in
circulation is directly proportional to the general price level. I
have charted the Fiat Money Quantity (FMQ) as defined in his
paper:
Things to note here are:
The exponential fit to the FMQ. This demonstrates that FMQ is going
up at a rate greater than exponential. This means that the FMQ
exceeds the natural rate of increase you would expect to see from
population increase.
A popular idea in the alternative economics sphere is that present
government policies will lead to hyperinflation. This idea is at
odds with current thinking about why hyperinflations develop.
Generally hyperinflation is the result of a small politically
isolated nation losing a war or having a revolution or similar
setback. I'm fond of bold projections, and this one is pretty fun.
See the red line? It is a hyperbolic fit to the FMQ data. The
rectangular
hyperbola is a function that goes to infinity ( i.e. like a
hyperinflation) and it happens to fit the FMQ data to a Tee. The
rectangular hyperbola has an amusing quality that you can actually
tell the exact date that it becomes infinite. In this case that
date is 2020-7-2
