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If you’ve read the previous essays on Velocity and Money from this Anti-Concepts of Money series we can now discuss the Anti-Concept of Purchasing Power.
The Anti-Concept of Purchasing Power
Let’s look at another anti-concept, purchasing power. Wikipedia defines it as:
“the amount of goods and services that can be purchased with a unit of currency.”
Recall, that a proper concept is defined in terms of essential characteristics. But this notion focuses on an amount of goods. It does not distinguish between the scarcity of goods in a war-torn region and the rising prices due to too much money supply chasing too little goods supply.
The premise smuggled by this anti-concept is: the quantity of goods is an attribute of the money. That is, intrinsic to the money. If the amount of goods goes down for whatever reason, then the money itself has gone down.
If monetary science is to be a proper science, it just won’t do to ignore the reason for an increase or decrease in prices. One cannot just implicitly believe that goods are somehow inside the money. A child thinks little people are inside the TV. This anti-concept is just as naïve, though accepted by serious adults.
Yield Purchasing Power
What’s the right way to think about purchasing power?
Here is my lecture at AIER on Yield Purchasing Power and what’s wrong with our monetary system:
Here is our Gold Exchange Podcast episode on my theory of Yield Purchasing Power:
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