My purpose in writing it that way was to show that in deflationary times the purchasing power of gold increases. Deflation, defined as the decrease in the money supply resulting in an increase in the purchasing power of the monetary unit.

Roy Jastram's book, “The Golden Constant” showed the affects of inflation and deflation over the short and long run analyzing the English and American Experience, 1560-1976. His conclusion was;
Gold is a poor hedge against major inflation.
Gold appreciates in operational wealth in major deflation's.
Nevertheless, gold maintains its purchasing power over long periods of time, for example, half-century intervals.

My intent was to show that the purchasing power of gold increases during deflationary times, not just “in times of inflation” as Ramsey's quoting of Siegel suggests.

Keep in mind, I am critical of Jastram's work as well, since the price of gold was fixed by government throughout the 20th century and his book only covered six years in analyzing the dollar without gold's backing (1971-1977). He died before he could write anymore conclusions on the subject.

Thanks for the comment…hopefully this clarified things for you.

“If the price of a one ounce gold coin stays the same, and the value of the dollar decreases (because of more printing of dollars), your gold coin would buy you less. On the other hand, if the value of the dollar increases (contraction of the money supply), then the gold coin would purchase more goods. It’s purchasing power has increased with the rise in the value of the dollar.”

Your statement is quite in conflict with ur general stand of gold as a hedge against inflation. I think if the value of the dollar decreases, the dollar price of the one ounce gold will increase and vice versa. Ur assumptuion of price of the gold not changing is flawed. Its the purchasing capacity interms with any other product remains the same.

Please Reply.

My purpose in writing it that way was to show that in deflationary times the purchasing power of gold increases. Deflation, defined as the decrease in the money supply resulting in an increase in the purchasing power of the monetary unit.

Roy Jastram's book, “The Golden Constant” showed the affects of inflation and deflation over the short and long run analyzing the English and American Experience, 1560-1976. His conclusion was;
Gold is a poor hedge against major inflation.
Gold appreciates in operational wealth in major deflation's.
Nevertheless, gold maintains its purchasing power over long periods of time, for example, half-century intervals.

My intent was to show that the purchasing power of gold increases during deflationary times, not just “in times of inflation” as Ramsey's quoting of Siegel suggests.

Keep in mind, I am critical of Jastram's work as well, since the price of gold was fixed by government throughout the 20th century and his book only covered six years in analyzing the dollar without gold's backing (1971-1977). He died before he could write anymore conclusions on the subject.

Thanks for the comment…hopefully this clarified things for you.

“If the price of a one ounce gold coin stays the same, and the value of the dollar decreases (because of more printing of dollars), your gold coin would buy you less. On the other hand, if the value of the dollar increases (contraction of the money supply), then the gold coin would purchase more goods. It’s purchasing power has increased with the rise in the value of the dollar.”

Your statement is quite in conflict with ur general stand of gold as a hedge against inflation. I think if the value of the dollar decreases, the dollar price of the one ounce gold will increase and vice versa. Ur assumptuion of price of the gold not changing is flawed. Its the purchasing capacity interms with any other product remains the same.

Please Reply.