Money & goods change hands rapidly in hyperinflation and in times of high speculative activity (items bought for the purpose of being resold rather than consumed), but this would not be a sign that the demand for money has increased.
The first century of Spain's colonization of America (1500 - 1600) was unusual insofar as the vast importation of newly discovered gold & silver from the Americas drove Spanish prices up 400%. During the 19th century, when most of the world was on a gold standard, prices typically fell by a small amount each year except in times of war when governments used inflated money to finance their military. The great durability of gold meant that the mining output of any one year had little effect on the total world supply of gold (which had accumulated for centuries). With the supply of goods increasing at a rate slightly greater than increases in the supply of gold, mild deflation boosted the real income and living standards of every worker.
In the year 1900 most goods in the United States were cheaper than they had been in the year 1800. In the 25 years following 1872 the cost of milk, rice, mutton, butter, tea and many other commodities had dropped about 50%. Contrast this gold-standard period with the era of government-controlled money: in 1997 a US dollar was worth only 14 cents (14%) of a 1947 dollar. Some people have argued that the supply of gold is inadequate to serve as a medium of exchange in the modern world. But market conditions cause supply to match demand at a clearing price for any commodity, including money. The price of gold would rise to meet the demand and/or other commodity-monies would enter the market to fulfill the demand for money.
Because price level corresponds to the relationship between the supply of goods and the supply of money, price inflation will result either from an increase in the supply of money or from a decrease in the supply of goods. Conversely, price deflation will result either from a decrease in the supply of money or an increase in the supply of goods. If the supply of money is increasing in tandem with an increase in the supply of goods, the money inflation will not correspond to a price inflation — prices will not change. The price deflation resulting from fractional-reserve monetary contraction in a recession has very different economic implications from the price deflation resulting from increased productivity.
The first century of Spain's colonization of America (1500 - 1600) was unusual insofar as the vast importation of newly discovered gold & silver from the Americas drove Spanish prices up 400%. During the 19th century, when most of the world was on a gold standard, prices typically fell by a small amount each year except in times of war when governments used inflated money to finance their military. The great durability of gold meant that the mining output of any one year had little effect on the total world supply of gold (which had accumulated for centuries). With the supply of goods increasing at a rate slightly greater than increases in the supply of gold, mild deflation boosted the real income and living standards of every worker.
In the year 1900 most goods in the United States were cheaper than they had been in the year 1800. In the 25 years following 1872 the cost of milk, rice, mutton, butter, tea and many other commodities had dropped about 50%. Contrast this gold-standard period with the era of government-controlled money: in 1997 a US dollar was worth only 14 cents (14%) of a 1947 dollar. Some people have argued that the supply of gold is inadequate to serve as a medium of exchange in the modern world. But market conditions cause supply to match demand at a clearing price for any commodity, including money. The price of gold would rise to meet the demand and/or other commodity-monies would enter the market to fulfill the demand for money.
Because price level corresponds to the relationship between the supply of goods and the supply of money, price inflation will result either from an increase in the supply of money or from a decrease in the supply of goods. Conversely, price deflation will result either from a decrease in the supply of money or an increase in the supply of goods. If the supply of money is increasing in tandem with an increase in the supply of goods, the money inflation will not correspond to a price inflation — prices will not change. The price deflation resulting from fractional-reserve monetary contraction in a recession has very different economic implications from the price deflation resulting from increased productivity.