My Position

After studying the different points of view it has become apparent that the amount of money in circulation has nothing to do with inflation rates, and the quantity theory of money is false. There is a lesser known theory that I believe presents a much more reasonable explanation for inflation. The real bills doctrine is a theory that describes inflation as a product of improperly backed money. According to the real bills doctrine, if the backing for a currency is sufficient there will be no inflation. Under this model there is no limit to how much money can be created. This school of thought believes that anything that has value is acceptable as backing for currency. IOU’s, collateral, or anything that has value equal to that of the currency issued is sufficient backing for money. The backing for money is what the currency is exchangeable for. The real bills doctrine is in contrast to the quantity theory which supports the idea that gold is the only acceptable backing for currency. Violating the real bills doctrine is a more logical explanation for inflation than the quantity theory of money.