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The price of gold might have remained constant, but that's hardly the binding factor here. All inflation is measured with respect to a basket of goods and if you choose "an ounce of gold" as your basket of goods then under a gold standard you'll get 0 inflation by definition.

Exactly. If you define a new basket of goods to be "one bottle of coca-cola" (let's call it's a "Coka"), then there has been no inflation since coke was first sold! One bottle of coke still costs the same as 1 Coka!

To elaborate, it would be a basket of goods comprised only of Coke, measured using the Coka currency.

It's something like ∂Coke/∂Coka, and historically when gold presumed to be a neutral measurement of value, the price of labor and the price of land still varied with respect to each other.

I am reminded of The Economist's "Big Mac Index", comparing currencies' purchasing power to buy a Big Mac in different countries. The index "seeks to make exchange-rate theory a bit more digestible". ;)



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