The OG Quantity Theory of Money (QTM)

The OG Quantity Theory of Money (QTM)
An excessive quantity of money should be avoided
Nicolaus Copernicus

In economics, one of the common theories thrown around is QTM AKA the Quantity Theory of Money. While many utilize QTM as a general theory explaining the relationship between money supply and the general price levels of goods and services, it has been coined and re-coined by many economists over the years including but not limited to John Locke and Milton Friedman. Every time it’s “re-coined”, its meaning changes slightly – for better or worse. Well who was the OG? What did he/she actually theorize?

Who coined QTM? The original creator of QTM was none other than Nicolai Copernici aka Copernicus. Yes, the guy who theorized that the sun was actually the center of the solar system, not Earth. Not only was Copernicus able to theorize about the solar system and go against the grain of society at the time, but he was also able to conceptualize the idea of inflation essentially in his head.

What is the Original QTM? The original QTM stated that prices of goods and services change in direct correlation with the supply of money in society.

When did the original QTM come about? Copernicus created this concept way back in 1517, but the book detailing this thoughts titled Monetae cudendae ratio was published in 1526.

We in our sluggishness do not realize that the dearness of everything is the result of the cheapness of money. For prices increase and decrease according to the condition of the money.

Nicolaus Copernicus

An Austrian Perspective on the History of Economic Thought, by Murray N. Rothbard, Economic Thought Before Adam Smith ed., vol. 1, Ludwig Von Mises Institute, 2006. 

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