gold vs AUD

[ERICOPOLY]

I have a desire to preserve my spending power from a devaluation of the USD.

 

Regarding gold, as I've mentioned before I think it already prices in a lot of inflation that hasn't yet happened.  Some people don't agree with that, however...  But let us take a currency like the Australian dollar where the government isn't going fiscally crazy and isn't monetizing and doesn't have huge unfunded liabilities... all the things that people claim are causing the gold to climb in USD terms.

 

Why is gold rising so rapidly against the Australian dollar?

 

http://finance.yahoo.com/q/bc?t=5y&s=AUDUSD%3DX&l=on&z=m&q=l&c=gld

 

I'm not trying to stir up a debate on whether or not gold is going to crash to 10 bucks or anything, but can't it at least crash back to the AUD/USD line on that chart in the link above?  Or is gold priced accurately and does the Australian dollar need to inflate to catch gold?  Or do the goldbugs think that the Australian dollar is really depreciating in real terms against gold at this pace?

 

 

[ERICOPOLY]

Thought of something...

 

Then there is gold vs silver (money vs money standoff):

http://finance.yahoo.com/q/bc?s=GLD&t=5y&l=on&z=m&q=l&c=slv

 

 

Why is gold (real money) appreciating vs silver (real money)?

 

 

And silver is tracking the AUD closer, at least over the past few years:

http://finance.yahoo.com/q/bc?t=5y&s=AUDUSD%3DX&l=on&z=m&q=l&c=slv

[arbitragr]

I have a desire to preserve my spending power from a devaluation of the USD.

 

Regarding gold, as I've mentioned before I think it already prices in a lot of inflation that hasn't yet happened.  Some people don't agree with that, however...  But let us take a currency like the Australian dollar where the government isn't going fiscally crazy and isn't monetizing and doesn't have huge unfunded liabilities... all the things that people claim are causing the gold to climb in USD terms.

 

Why is gold rising so rapidly against the Australian dollar?

 

http://finance.yahoo.com/q/bc?t=5y&s=AUDUSD%3DX&l=on&z=m&q=l&c=gld

 

I'm not trying to stir up a debate on whether or not gold is going to crash to 10 bucks or anything, but can't it at least crash back to the AUD/USD line on that chart in the link above?  Or is gold priced accurately and does the Australian dollar need to inflate to catch gold?  Or do the goldbugs think that the Australian dollar is really depreciating in real terms against gold at this pace?

 

 

 

Yeah you might have a point regarding the bullishness (bubbleness) of gold.

 

However if you track aud/usd + gld in the short term (e.g. 3-6 months) there's a stronger correlation: http://finance.yahoo.com/q/bc?s=AUDUSD=X&t=3m&l=on&z=m&q=l&c=gld

 

Tracking gld vs aud/usd over a 5 year period won't show as much correlation b/c the australian economy is tied to other things unrelated to gold; e.g. heavy reliance on financial services and mining/materials, which both have nothing to do with gold. In that case I venture to guess that gold would maintain its value over time more than the aud, just due to the sheer fact that gold isn't an economy with things like financial services in it.

 

It's not only monetary policy. What you'll find with currencies like aud is that the rises and advances tend to do so especially when the resources sector rises and advances. This is in addition to monetary and fiscal policies.

Currencies are too complicated to predict, just like making predictions about the macro.

 

I tend to stay away from complex macro stuff. However just sometimes, *sometimes* a call is easy when there are extremes happening in the market. The calling a dead cat bounce when there was a free fall in March was quite easy, and calling an overvaluation of tech stocks in 2000 was easy.

 

The extreme today is the Fed Reserve leveraging up the system again.

 

 

 

[arbitragr]

 

Why is gold rising so rapidly against the Australian dollar?

 

 

If you look at it over a 6 month period (when the Fed's debasement of the USD has been most concerted) the question then becomes;

 

Why is the Australian dollar rising so rapidly against gold?

 

http://i163.photobucket.com/albums/t314/ripleyx/Finance/gldvsaud.jpg

 

 

[ERICOPOLY]

 

Why is gold rising so rapidly against the Australian dollar?

 

 

If you look at it over a 6 month period (when the Fed's debasement of the USD has been most concerted) the question then becomes;

 

Why is the Australian dollar rising so rapidly against gold?

 

http://i163.photobucket.com/albums/t314/ripleyx/Finance/gldvsaud.jpg

 

 

 

 

It's true, the closer you look the forest is invisible.  I mean, if you walk within 2 inches of a single old growth douglas fir you are not going to see anything but.

 

I went to 5 years hoping this is a bit more like viewing the forest from 1,000 feet -- it irons out the panic to the USD that took place last year.  The 5 year period shows that AUD/GOLD got out of whack long before the financial crisis (the gold bugs like to say that the drop in the GOLD/USD ratio had nothing to do with fundamentals, but rather panic).

 

 

 

[arbitragr]

mate ... currency movements are way too complex to be basing it on just monetary policy.

 

5 years ... I wouldn't have a clue. fiscal, monetary policy? demand pull? stuff like yen-carry trade going on ... export activity? who knows.

[ERICOPOLY]

I should really be asking Broxburnboy who knows a lot about gold. 

 

I had a long discussion with him a year ago.  He suggested that gold is rising vs the USD due to monetary policy.  I suggested that everything still has a fair price, but that essentially led to a statement that well, gold is money.

 

So recently I've been rethinking the topic with the recent drum pounding about gold and inflation.  Cardboard for example recently suggested that gold is a good buy.

 

So tying some other statements together, like "gold is money", well silver is also money and silver is not being debased.  So why is gold crushing silver?  And why is gold crushing the AUD when the argument is that gold is merely rising vs the USD monetary inflation?

 

[ERICOPOLY]

There was also talk that gold is not inflated vs the cost of "a fine tailored suit".

 

So I looked for the cost of what that would be -- now, where do we find data on the cost of a "fine tailored suit" 50 years ago vs 10 years ago vs today?

 

It turns out that well, one needs to define "fine".  The quality of fabric makes all the difference.  So who is publishing numbers that accurately compare the same quality grade of fabric in say, 1910 vs today?  As one can see, the difference can be a matter of 4x in price.  http://www.askmen.com/fashion/fashiontip/34_fashion_advice.html

 

 

The suit's fabric will make the difference between a $1500 suit and a $6000 one. That's why many popular designers use fabrics with a grade of 100s or 110s [quality of fabric] to cut costs and increase markups.

 

Because you're not paying for the brand name, you can opt for higher quality grades and still pay the same price or cheaper. Anything above a grade of 110s is guaranteed to make a respectable looking and durable suit. As you may have guessed, higher grade equals better quality and an elevated price.

 

Grades range from low 80s to high-end super 180s.

 

[triedtestedand]

And now I'm getting not only financial pointers from Ericopoly, but clothing tips as well!  This is great stuff! Given the fashion gauntlet I run each day leaving the house, I think my wife and 3 daughters will be funding lunch ...

[UhuruPeak]

So tying some other statements together, like "gold is money", well silver is also money and silver is not being debased.  So why is gold crushing silver?  And why is gold crushing the AUD when the argument is that gold is merely rising vs the USD monetary inflation?

 

Silver and Gold have much in common but also the 2 important differences:

- unlike Gold, Silver has industrial uses; pretty much all the gold ever mined is still available, whereas Silver gets used and disappears; yet it usually doesn't represent a high % of the end price so users are not extremely price sensitive

- the Silver market is much smaller and therefore much more volatile

=> When there is an upturn, Gold takes off first, then gold stocks, then silver & silver stocks a little later - but Silver's rise is then meteoric and ends up trouncing Gold's move.  In a downturn however, Gold takes everything with it right away, and again Silver's action magnifies that move.

 

 

I have been following a newsletter for a few years (Zeallc, by Adam Hamilton); he or his associate post an article every friday on goldseek.com.  His is the only newsletter I have ever purchased, and I have found his advice to be generally profitable.  You may want to look at his free articles and check his website. (a warning to our fundamental analysis minded friends here, he relies mostly on TA even though he's also a CPA).  For the record, he is currently as bullish on Gold/Silver as he's been in years.

 

[Guest Broxburnboy]

I have a desire to preserve my spending power from a devaluation of the USD.

 

Regarding gold, as I've mentioned before I think it already prices in a lot of inflation that hasn't yet happened.  Some people don't agree with that, however...  But let us take a currency like the Australian dollar where the government isn't going fiscally crazy and isn't monetizing and doesn't have huge unfunded liabilities... all the things that people claim are causing the gold to climb in USD terms.

 

Why is gold rising so rapidly against the Australian dollar?

 

http://finance.yahoo.com/q/bc?t=5y&s=AUDUSD%3DX&l=on&z=m&q=l&c=gld

 

I'm not trying to stir up a debate on whether or not gold is going to crash to 10 bucks or anything, but can't it at least crash back to the AUD/USD line on that chart in the link above?  Or is gold priced accurately and does the Australian dollar need to inflate to catch gold?  Or do the goldbugs think that the Australian dollar is really depreciating in real terms against gold at this pace?

 

 

 

 

OK I'll bite...

 

Let's pretend for argument's sake that gold is money... the ultimate store of value on the planet, the go to guy when fiat currencies fail

and economic empires decline. This has been the case through recorded history, when international monetary arrangements become volatile through currency manipulation and devaluation, the flight to safety is a flight to gold.

 

As late as 1971, all participating sovereign currencies were linked to gold at a fixed rate. This fix had many advantages.. international trade boomed in a world where money was sound. The big disadvantage (in the view of governments) was that it capped individual governments spending and set a limit on issuing credit which tended to crimp economic expansion in booming economies and penalized emerging economies for the same reason.. lack of credit.

 

The world's dominant currency (USD) was forced to break its peg to gold in order to pay off its spending on the ruinous Vietnam War and fund its budgetary deficit. Credit was thus expanded and the USD, no longer backed by gold, but backed by its dominant economic growth engine, maintained its supremacy. At this point the USD became a promise to pay and was backed by the largest and strongest economy on the planet.  Even though monetary inflation of the USD was now a given, as long the growth of national GDP, kept pace, the dollar would inflate at a low and manageable rate and was universally accepted in lieu of gold and gold backed currencies (although the Swiss Franc, which until recently was convertible to gold, remained the ultimate sound currency).

 

Over time the price of gold reflects the accumulated inflation of the national currency, it spikes when the ability to repay is brought into question.. in highly  inflationary times like the late 70s. When the US economy expanded and the money supply was constrained to funding real economic growth, the price of gold languished, but over time still reflects the decline in real purchasing power of the USD.

To get a real feel for actual purchasing power, calculate prices in terms of gold ounces (or goldgrams, which are now a popular way of owning gold in Asia).

 

The value of an ounce of gold over time has been constant, the purchasing power of fiat currencies such as the USD over time erodes.

Let's look at the famous  5 cent cigar which JP Morgan (the guy, not the bank) could no longer find in 1910... today it would probably cost about 10 bucks USD or .01 ozs of gold. In 1910, .01 ozs of gold was about 21 cents, roughly  the same price for a commodity whose real cost remains unchanged over the century.

 

http://www.wisegeek.com/what-is-the-historical-price-of-gold.htm

 

 

To the question at hand... the recent moves of the AUD and the price of gold.

 

US economic growth is severely compromised through years of credit expansion which funded malinvestment... producing no real economic growth and thus diluting the value of the world default currency.. the USD. Moreover the intention of governments is to continue the dilution of the currency through record deficit spending and credit creation, which to date have only settled past bad investments without any net real wealth creation. At the same time the economy is experiencing a sever cyclical downturn which will further the erosion of GDP in REAL terms (vs. gold and sounder currencies like the AUD). 

 

If GDP as measured in USD increases, but declines in terms of the USD indexed to a basket of alternate currencies, or the USD indexed to the price of gold, we can say that US GDP has declined in REAL terms. The same argument can be made for the major stock indexes. If the S&P 500 is at the same level as it was a year ago does this mean that stocks have retained their value? Of course not, if the USD has declined against the aforementioned indexes. So the AUD and other currencies where GDP is expanding ahead of the creation of fiat currency will continue to appear to appreciate against the greenback, when in fact it is the greenback depreciating against the AUD.

 

The real measure of the purchasing power of the AUD (or CDN or others) will always be vs. the price of gold.

Since the future purchasing power of the buck is in doubt and its movements volatile, other nations are making alternate arrangements to facilitate international trade and looking elsewhere for customers and flows of capital. Barring some miraculous economic turnaround, the USD has lost its role as the world default currency, and an investor wishing to preserve his purchasing power would be well advised to own some physical gold.

 

 

[ERICOPOLY]

I have a desire to preserve my spending power from a devaluation of the USD.

 

Regarding gold, as I've mentioned before I think it already prices in a lot of inflation that hasn't yet happened.  Some people don't agree with that, however...  But let us take a currency like the Australian dollar where the government isn't going fiscally crazy and isn't monetizing and doesn't have huge unfunded liabilities... all the things that people claim are causing the gold to climb in USD terms.

 

Why is gold rising so rapidly against the Australian dollar?

 

http://finance.yahoo.com/q/bc?t=5y&s=AUDUSD%3DX&l=on&z=m&q=l&c=gld

 

I'm not trying to stir up a debate on whether or not gold is going to crash to 10 bucks or anything, but can't it at least crash back to the AUD/USD line on that chart in the link above?  Or is gold priced accurately and does the Australian dollar need to inflate to catch gold?  Or do the goldbugs think that the Australian dollar is really depreciating in real terms against gold at this pace?

 

 

 

 

OK I'll bite...

 

Let's pretend for argument's sake that gold is money... the ultimate store of value on the planet, the go to guy when fiat currencies fail

and economic empires decline. This has been the case through recorded history, when international monetary arrangements become volatile through currency manipulation and devaluation, the flight to safety is a flight to gold.

 

As late as 1971, all participating sovereign currencies were linked to gold at a fixed rate. This fix had many advantages.. international trade boomed in a world where money was sound. The big disadvantage (in the view of governments) was that it capped individual governments spending and set a limit on issuing credit which tended to crimp economic expansion in booming economies and penalized emerging economies for the same reason.. lack of credit.

 

The world's dominant currency (USD) was forced to break its peg to gold in order to pay off its spending on the ruinous Vietnam War and fund its budgetary deficit. Credit was thus expanded and the USD, no longer backed by gold, but backed by its dominant economic growth engine, maintained its supremacy. At this point the USD became a promise to pay and was backed by the largest and strongest economy on the planet.  Even though monetary inflation of the USD was now a given, as long the growth of national GDP, kept pace, the dollar would inflate at a low and manageable rate and was universally accepted in lieu of gold and gold backed currencies (although the Swiss Franc, which until recently was convertible to gold, remained the ultimate sound currency).

 

Over time the price of gold reflects the accumulated inflation of the national currency, it spikes when the ability to repay is brought into question.. in highly  inflationary times like the late 70s. When the US economy expanded and the money supply was constrained to funding real economic growth, the price of gold languished, but over time still reflects the decline in real purchasing power of the USD.

To get a real feel for actual purchasing power, calculate prices in terms of gold ounces (or goldgrams, which are now a popular way of owning gold in Asia).

 

The value of an ounce of gold over time has been constant, the purchasing power of fiat currencies such as the USD over time erodes.

Let's look at the famous  5 cent cigar which JP Morgan (the guy, not the bank) could no longer find in 1910... today it would probably cost about 10 bucks USD or .01 ozs of gold. In 1910, .01 ozs of gold was about 21 cents, roughly  the same price for a commodity whose real cost remains unchanged over the century.

 

http://www.wisegeek.com/what-is-the-historical-price-of-gold.htm

 

 

To the question at hand... the recent moves of the AUD and the price of gold.

 

US economic growth is severely compromised through years of credit expansion which funded malinvestment... producing no real economic growth and thus diluting the value of the world default currency.. the USD. Moreover the intention of governments is to continue the dilution of the currency through record deficit spending and credit creation, which to date have only settled past bad investments without any net real wealth creation. At the same time the economy is experiencing a sever cyclical downturn which will further the erosion of GDP in REAL terms (vs. gold and sounder currencies like the AUD). 

 

If GDP as measured in USD increases, but declines in terms of the USD indexed to a basket of alternate currencies, or the USD indexed to the price of gold, we can say that US GDP has declined in REAL terms. The same argument can be made for the major stock indexes. If the S&P 500 is at the same level as it was a year ago does this mean that stocks have retained their value? Of course not, if the USD has declined against the aforementioned indexes. So the AUD and other currencies where GDP is expanding ahead of the creation of fiat currency will continue to appear to appreciate against the greenback, when in fact it is the greenback depreciating against the AUD.

 

The real measure of the purchasing power of the AUD (or CDN or others) will always be vs. the price of gold.

Since the future purchasing power of the buck is in doubt and its movements volatile, other nations are making alternate arrangements to facilitate international trade and looking elsewhere for customers and flows of capital. Barring some miraculous economic turnaround, the USD has lost its role as the world default currency, and an investor wishing to preserve his purchasing power would be well advised to own some physical gold.

 

 

 

This offers an explanation of why USD is depreciating against AUD.  It also offers an explanation of why USD is depreciating against gold.

 

However, it does not explain the rapid depreciation of the AUD against gold.

 

[Guest Broxburnboy]

This offers an explanation of why USD is depreciating against AUD.  It also offers an explanation of why USD is depreciating against gold.

 

However, it does not explain the rapid depreciation of the AUD against gold.

 

 

Ultimately, all currency's REAL depreciation will be measured vs. gold. If the inflation of any sovereign currency outpaces its real ability to pay (Real economic growth), then it will devalue vs. gold. Like all calculations of net worth, the target constantly moves, sometimes in large jumps... these produce blips on the overall trend line, but at the end of the day the value of the AUD (or any currency) will reflect the amount of real inflation (real growth vs monetary inflation) of the particular currency.

[ERICOPOLY]

This offers an explanation of why USD is depreciating against AUD.  It also offers an explanation of why USD is depreciating against gold.

 

However, it does not explain the rapid depreciation of the AUD against gold.

 

 

Ultimately, all currency's REAL depreciation will be measured vs. gold. If the inflation of any sovereign currency outpaces its real ability to pay (Real economic growth), then it will devalue vs. gold. Like all calculations of net worth, the target constantly moves, sometimes in large jumps... these produce blips on the overall trend line, but at the end of the day the value of the AUD (or any currency) will reflect the amount of real inflation (real growth vs monetary inflation) of the particular currency.

 

 

Historically silver has been a monetary metal as well.  Shouldn't silver and gold maintain a relatively constant exchange rate over time (ignoring for a moment the fact that silver is actually getting scarcer)? 

 

Do you buy the argument that silver is money?  It has been treated as such throughout history.

 

I am trying to determine how much gold has overshot (high price for a cheery consensus), and am scratching my head as to why the same arguments that are supporting gold don't also apply to silver.

[ERICOPOLY]

The big disadvantage (in the view of governments) was that it capped individual governments spending and set a limit on issuing credit which tended to crimp economic expansion in booming economies and penalized emerging economies for the same reason.. lack of credit.

 

Lack of credit is the reason why Hoisington doesn't believe the problem will be inflation.  You also mention that the gold standard held back credit, and thus held back inflation.  And so you are on the same page as him, sort of.  Only you don't seem to agree that holding back credit will hold back inflation, this time.

 

 

http://www.hoisingtonmgt.com/pdf/HIM2009Q2NP.pdf

 

One of the more common beliefs about

the operation of the U.S. economy is that a

massive increase in the Fed’s balance sheet will

automatically lead to a quick and substantial rise

in inflation. An inflationary surge of this type must

work either through the banking system or through

non-bank institutions that act like banks which are

often called “shadow banks”. The process toward

inflation in both cases is a necessary increasing cycle

of borrowing and lending. As of today, that private

market mechanism has been acting as a brake on the

normal functioning of the monetary engine.

[Guest Broxburnboy]

The big disadvantage (in the view of governments) was that it capped individual governments spending and set a limit on issuing credit which tended to crimp economic expansion in booming economies and penalized emerging economies for the same reason.. lack of credit.

 

Lack of credit is the reason why Hoisington doesn't believe the problem will be inflation.  You also mention that the gold standard held back credit, and thus held back inflation.  And so you are on the same page as him, sort of.  Only you don't seem to agree that holding back credit will hold back inflation, this time.

 

 

http://www.hoisingtonmgt.com/pdf/HIM2009Q2NP.pdf

 

One of the more common beliefs about

the operation of the U.S. economy is that a

massive increase in the Fed’s balance sheet will

automatically lead to a quick and substantial rise

in inflation. An inflationary surge of this type must

work either through the banking system or through

non-bank institutions that act like banks which are

often called “shadow banks”. The process toward

inflation in both cases is a necessary increasing cycle

of borrowing and lending. As of today, that private

market mechanism has been acting as a brake on the

normal functioning of the monetary engine.

 

Please don't put words in my mouth. This is what I believe:

Currently the massive fiscal and monetary stimulus is shoring up past credit, settling the losses of past malinvestment in an effort to stem the implosion of USD credit. If successful, the real purchasing power of the dollar will be diluted to the extent of the losses so absorbed. The recent movements in the international exchange rate for US dollars in terms of other major currencies and in terms of gold

confirm this dilution.

Does Hoisington or any else really believe that real wealth is being created by the expansion of USD credit and printing of money and recent downward trends are going to reverse?

Generally USD prices of non discretionary items and items with a strong international component will rise to reflect this dillution. The price of such items will generally be stable in terms of gold grams and less so in terms of other sovereign currencies whose dillution is less extensive than the USD.

With the loss of reserve currency status, real wages in the US will continue to erode and the standard of living will continue to drop to be more in line with global standards... there is absolutely no reason why a plumber in the US should make more than a plumber in India, Iraq or China.

I sign off with a quote from Ludwig Von Mises, the influential economic scholar off the "Austrian School", who I believe is absolutely correct in the current instance as he has been in the past:

 

"There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.

[ERICOPOLY]

Currently the massive fiscal and monetary stimulus is shoring up past credit, settling the losses of past malinvestment in an effort to stem the implosion of USD credit. If successful, the real purchasing power of the dollar will be diluted to the extent of the losses so absorbed. The recent movements in the international exchange rate for US dollars in terms of other major currencies and in terms of gold

confirm this dilution.

 

The current exchange rate movements and gold vs the USD in 2009 alone do support that narrative, but it's up in the air as to whether or not it "confirms this dilution".

 

Gold for example is also blowing away the AUD -- does this mean it is confirming a dilution of the AUD?  Gold might just be going off on an overvaluation of it's own -- it would more closely support your thesis if strong currencies like the AUD were keeping pace with gold, but that clearly isn't so.  The AUD has lost 1/3 of it's purchasing power against gold in the past 12 months.  The other monetary currency, silver, is also getting left behind by gold this year... and we know for sure that it's no clear sign of dilution of silver  8)

 

The USD has actually only lost a couple of percent against the AUD in the past 12 months, and if you go back 15 months the USD has actually strengthened... despite all of the bailouts and money printing.  Confirmation of what then?  Dilution?

 

 

 

 

 

[ERICOPOLY]

Does Hoisington or any else really believe that real wealth is being created by the expansion of USD credit and printing of money and recent downward trends are going to reverse?

 

Galbraith points out in Money: Whence It Came, Where it Went that inflation is actually good, in very small controlled doses.

 

But you ask about Hoisington.  Well, in Hoisington's essay he points out that prices are set by supply and demand, and that without private credit expansion the money simply isn't getting into the hands of people who buy things, so prices won't rise.

 

Personally I think the currency will be devalued until this country actually produces something more than it consumes, and as I wondered out loud years ago I think the bubble in this country is incomes... people just have high incomes relative to the rest of the world and I couldn't figure it out... but you can see, that's why the jobs go overseas.  So I too think incomes will need to come down to global standards, whereever that may be.  The only other option I can think of is tariffs on manufactured imports, but then (in addition to a trade war) it would mean that we can't afford cheap imported goods anymore so again, falling standard of living.

 

I like the thinking of the Austrians because if you run the country that way we'd not have gotten into this mess in the first place.  But I would like to ask von Mises about the velocity of money.

[ERICOPOLY]

So I think Hoisington's main point (in layman's terms) is that doubling the money supply doesn't push prices up unless private credit is extended. 

 

After all, money in my pocket didn't double as a result of the Fed actions.  My sister doesn't have twice the money.  The people unemployed in California don't have twice the money.  Unless people expand lending to these consumer folks, how is the Fed action going to push up prices? 

 

My thinking is that the Fed action is propping up financial entities so that they will be in the position to extend lending as some point in the future, and to keep them from dramatically scaling back on their existing level of lending (which would push prices down).

 

I agree with you though that if the USD depreciates against other world currencies, then the price of basic commodities will rise in USD terms and thus not all price inflation can be averted.  No free lunch, but not necessarily an immediate doubling of the price level simply because the money supply doubled.