Money, Banking Why is inflation higher than money growth in high inflation countries and lower than money growth in low inflation countries?

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Money growth cannot keep up with inflation if that growth is faster than economic activity. Basically, when more money is printed without "real-value" backing -- commodity exports or national stock trading, since there is no gold standard anymore -- the real-value of that money lowers, causing high inflation. Only when a low-inflation country prints more money backed by a strong economy does that money acquire real-value.

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It does figure that countries who are experiencing high inflation and money growth are going to be experiencing significant turmoil that is resulting in these financial factors. This of course is a sign or a cause of a massive drop of output that can help to trigger inflation and keep it higher than money growth.

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By the quantity theory of money, this would have to be due to differences in the amount of output of these countries.

The equation for the quantity theory of money is P = (M*V)/Q.  If you are having inflation that is higher than money growth, it must be because you are not getting enough of a change in Q to offset the change in M.

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