Yeah, I’m being very hypothetical when discussing constant money supply. For the purposes of this discussion, just assume that somehow bankers decided to not increase the money supply.
Are you in agreement then that over the long term, the total world index fund must approximate the total growth in money supply (I guess assuming constant money velocity)? If not can you help me understand why not?
Also related: can GDP increase somehow if money supply is fixed and money velocity is fixed?
Yeah, I’m being very hypothetical when discussing constant money supply. For the purposes of this discussion, just assume that somehow bankers decided to not increase the money supply.
Are you in agreement then that over the long term, the total world index fund must approximate the total growth in money supply (I guess assuming constant money velocity)? If not can you help me understand why not?
Also related: can GDP increase somehow if money supply is fixed and money velocity is fixed?
Yes in this hypothetical, stock indexes would stay roughly constant in nominal terms, but would rise just as fast in real terms.
And GDP will increase in real terms if money supply is fixed, but not in nominal terms.
Both of these are because we’d have deflation.
Thanks for helping clear this up! That makes a lot of sense.