Necessary Money Growth


“Money supply must grow to accommodate economic growth.”


An increase in the supply of money adds nothing to the welfare of the members of an economic system. The economy can produce more food, clothing, shelter, and iPods, which add to welfare, with the same amount of money.

If an economy with a fixed money supply expands, the general price level will decline. Any growth in the supply of money, no matter how slow, distorts the information that prices carry about relative supply and demand.