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Bitcoin, Gold, and the Quantity of Money
by Keith Weiner
The popular view today is based on the linear Quantity Theory of Money. It seems to be common sense. If more units of a currency are issued, then the value of each unit should fall. Many people may not think of it in explicit terms, but the idea is that the value of one unit of a currency is 1/N, where N is the total money supply. If you double the money supply, then you halve the value of each currency unit.
Inflation, according to this view, is either the cause—the increase in the money supply itself. Or it’s the effect—rising prices. The Keynesians hold that inflation is good, and the Monetarists basically agree, though they quibble that the rate should be limited. The Austrians universally think inflation is bad.
The Quantity Theory is not based in reality. One should think of this theory like the Lamarckian theory of evolution.[1]
Lamarck asserted that changes to an animal’s body—e.g. its tail is cut off—can be passed on to its offspring. At the time, this theory may have seemed only common sense, and it was very convenient, if not tempting. The same is true with the Quantity Theory of Money. It is convenient, seems like common sense, tempting—and wrong.
The Fed has been inflicting Quantitative Easing on us for five years. There are many negative effects, but rising prices, today, is at best debatable. Certainly, even where prices have risen, the increase is not nearly proportional to the increase in the money supply. Advocates of the theory explain this by saying that the money hasn’t entered the economy, it’s sitting on bank balance sheets. However, money is always on bank balance sheets in a debt-based system, so this answer is not satisfying.
Enter, bitcoin, a cryptography-based currency and technology developed by someone with the pseudonym Satoshi Nakamoto. It has been designed to have a limited rate of growth in the total quantity of currency, up to a predefined cap. There can never be more than 21M bitcoins. The Quantity Theory says that this will make prices of goods measured in bitcoins stable.
One problem with this theory is that the real costs in terms of land, capital, and labor to produce things is steadily falling. Every productive enterprise is constantly seeking to drive cost out of production. If a currency had a constant value, then prices in terms of this currency would be falling.
As we shall see below, the value of bitcoin will be anything but constant. Without a mechanism for responding to increased market demand by creating more currency, there is a fatal flaw.
In the real world, when prices appear to be stable it is not because anything is static or unmoving. It is because there is constant arbitrage. Arbitrage is the act of straddling a spread. If one thing becomes more valuable relative to something else, then someone will take the arbitrage. For example, if the price of eggs in a city downtown rises relative to the price of eggs in a farm town 50 miles away, then someone will buy eggs in the farm town and sell them in the city. This will lift the price in the farm town and depress the price in the city center, until there is not much of a gap any more.
To continue with the analogy on to another point, what happens if the price of eggs in the farm town is higher than the price in the city? This arbitrage is one-way. Distributors can only buy in the farm town and sell in the city; they do not distribute in the other direction.
There must be another arbitrage or arbitrages, if the farm-city egg spread is to remains stable. Indeed, there is. If the price of eggs gets cheap in the city, then consumers will prefer eggs to other foods.
In the body of a vertebrate, every joint is stabilized by a pair of muscles. Consider the upper arm. The biceps flexes it, and the triceps extends it. Muscles can only pull, but not push. There must be a second, opposing, muscle to move the joint in the opposite direction. This is analogous to arbitrage, as each arbitrage can only pull a spread tighter in one direction, but not push in the other.
No market is more important than the markets for money and credit.
So what happens when the price of money itself rises? In thinking about this question and the answer, you should not look at the dollar. The dollar is defective by design and does not work the way proper money ought to. The dollar is the product of fiat, not of a market. Everything about it is driven by forced wielded by the government.
It is more instructive to consider gold. Gold is produced by gold miners. They buy labor, oil, truck tires, machine parts, and they sell gold. As we saw above, they bid up these inputs and gold metal onto the market. The gap between the value of gold and the value of this broad swath across the major factors in the real economy is thus closed by the arbitrage of gold mining companies. This keeps the value of gold from becoming too high, or in other words allows gold to be produced in response to market demand.
What happens if market demand for gold drops? One reaction is that the jeweler and the artisan increase their activities. They tend to bid up gold metal, and sell jewelry and objets d’art onto the market. There is another kind of arbitrage, which is outside the scope of this article[2] but it’s worth mentioning. If the demand for gold metal drops, then the owners of gold, otherwise known as savers, can lend gold for interest. This tends to press down the bid on the rate of interest.
Now consider bitcoin. Bitcoin is not a fiat currency. No government forces anyone in any way to use it. However, bitcoin is irredeemable. That is, there is no agreement by anyone to redeem bitcoin in exchange for a defined quantity of gold, silver, or any real good. With its fixed quantity, there are no arbitrages regarding the value of bitcoin. So what does this mean? What will happen?
The value of bitcoin will be set entirely by speculators. In gold, there are numerous forces in reality—i.e. numerous arbitrages—that will keep the value of gold tied to the values of every other thing in the economic universe. The value of gold in a free market is the exact opposite of untethered and arbitrary. The value of gold cannot crash and it cannot shoot the moon.
Satoshi Nakamoto ignored these forces, and his design does not provide for them. The value of bitcoin is not tethered by the value of labor and capital. It was assumed to be sufficient that its quantity is fixed. It is the exact opposite of sufficient—a fatal flaw based on the Quantity Theory of Money, which is flawed to its core.
The speculators will use bitcoin as a toy to generate profits (as they already do). When the value of bitcoin is rising, it will be obvious. Everyone has a chart, and they can pile on. The value can rise much farther than anyone would expect. Eventually, the chart will show a topping pattern. Momentum will dry up. The speculators can see this too, and thus will begin a collapsing wave of bitcoin.
If a giant speculative spike occurred in food, the consequence is that poor people starve. When the price crashes, the consequence is that food producers will go bankrupt. As bad as this is, the consequences when the value of money spikes and crashes are incalculably worse. This is because every business, including food growers, depends on a stable currency.
To understand this, let’s ask the following question. If you take two bushels of corn and feed it to raise one chicken from egg to market, did you create or destroy wealth? Which has greater value, two bushels or one chicken? To answer, we use the common denominator of money. If Two bushels cost ½ ounce of silver and a chicken is 2 ounces of silver, then feeding the corn to the chick creates value.
Simple cases like this can be (and were, in the ancient world) resolved without money. Complex cases cannot be. If you borrow money to buy land, erect a building, buy machines and inventory, then hire people to manufacture computer chips, did you create or destroy wealth? This question cannot be answered without a stable unit of measure. It would not have been possible to answer it in the ancient world.
Businesses keep books to measure profit and loss. The very principle of bookkeeping depends on a constant value of the unit of account, the numeraire. When the value of the numeraire spikes and crashes, then business which produce wealth go can bankrupt. At the same time others, which destroy wealth, can grow larger, employing more people and more capital to scale up their wealth-destroying activities. This is occurring today on a massive scale.
Bitcoin may make a great speculation today, because its unique combination of technologies enables many transactions that would otherwise be impossible (due to government fiat). If you live in a country that does not recognize your right to freedom of speech, you can trade your local currency for bitcoin, pay Wordpress, and have your blog hosted safely outside your regime. There are many other kinds of legitimate transactions that are made possible by bitcoin.
Bitcoin would not work as the exclusive currency. Its unstable value is not suited to being used as the numeraire. For the same reason, it is not suitable for hoarding by wage earners. As I explain in In a Gold Standard, How are Interest Rates Set? it is the arbitrage between hoarding and saving (i.e. lending) that sets the floor under the rate of interest. If bitcoin is unsuitable for hoarding, then either it will not develop a lending market, or the lending market will not have a stable interest rate. A destabilized interest rate is the root cause of the ongoing global financial crisis.[3]
Bitcoin works well as a foil to fiat currencies. It makes it possible for people to conduct business that would otherwise be impossible. If enough people participate, then it becomes more difficult and more unpopular for governments to act to squelch those activities. It’s a pointed object lesson, showing people what is possible in a less-unfree market. Hopefully it will motivate them to clamor for more freedom.
Only gold serves as the objective measure of value necessary to act as the numeraire. It is no coincidence that the quantity of monetary gold is not fixed, but has elegant mechanisms to expand and contract in response to changing market demand.
[1] See the Wikipedia entry on Lamarckism
[2] See my paper In a Gold Standard, How are Interest Rates Set?
[3] See my papers: The Theory of Interest and Prices in Paper Currency
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Yes, yes - I have heard many times, that tomorrow will be replaced by something else: silver, copper, nickel, platinum and so on.
I wish you more grandiose fantasies about this.
Actually I am talking primarily about ceramics , semiconductors and composite materials. It's no fantasy.
Paperweight, really? All these things YOU "can" do with the metal are the reasons YOU value your gold today at $1260 or higher? Doesn't mean anybody else has to value it for the same reasons or at the same level.
Here's a Satoshi Nakamoto quote hinting at what "can" be done with bitcoin:
"As a thought experiment, imagine there was a base metal as scarce as gold but with the following properties: boring grey in colour, not a good conductor of electricity, not particularly strong, but not ductile or easily malleable either, not useful for any practical or ornamental purpose,
and one special, magical property: can be transported over a communications channel
If it somehow acquired any value at all for whatever reason, then anyone wanting to transfer wealth over a long distance could buy some, transmit it, and have the recipient sell it.
Maybe it could get an initial value circularly as you’ve suggested, by people foreseeing its potential usefulness for exchange. (I would definitely want some) Maybe collectors, any random reason could spark it."
"As a thought experiment, imagine there was a base metal as scarce as gold but with the following properties: boring grey in colour, not a good conductor of electricity, not particularly strong, but not ductile or easily malleable either, not useful for any practical or ornamental purpose, and one special, magical property: can be transported over a communications channel"
Anwer: The US Dollar when it was reedemable for gold coin.
How did this crap make it past the ZH editor ?
So many flaws in the article it would require an essay to rebut them one by one, so I will just summarize.
1. BTC does not have any cost of production or use connecting it to the real economy - FALSE
BTC requires computer hardware to support it, it requires electrical energy to maintain its security - check out how much has been spent in both power and hardware to mine BTC.
2. BTC does not have any other useful arbitrage - FALSE
All money is in competition in a free market, therefore BTC will compete with PM's and all other currencies.
3. BTC (unlike gold) cannot be used as an exclusive global reserve currency - FALSE
Any currency that has the position of EXCLUSIVE use will be distorted due to lack of arbitrage - this does not only apply to BTC it also applies to gold, which is why silver has always had a near equal value to gold when both are used as money (when I say equal, I mean equal by value - all of the silver in the market could be used to buy all the gold, even though the gold to silver ratio was 1:15). Anyone who believes in BTC should understand its role, it CANNOT displace gold and silver, in fact it needs them for its very survival - it needs them so that speculators will straddle the spreads between these three and the stability of each is assured - not only that, but all currencies will be arbitraged in this fashion, this will eventually lead to the collapse of fiat. Gold and silver will still be the superior money for saving, but BTC will still be used for saving as well - and due to its preferred use in transactions it is likely to also become the preferred unit of a account - but its stability will be due to its exchange rate versus gold and silver).
4. BTC is unsuitable for hoarding - FALSE (this is just ludicrous, even paradoxical when compared to the earlier part of the essay)
Gievn enough time for adoption and market penetration (when the 'S' curve is limiting) then the stability of BTC will be measured against gold (possibly silver also) - the value of BTC vs gold will be nearly stable, but slowly increasing over time relative to the increase in available gold. Note that this stability will only be evident after two things have happened; the market share of fiat in the currency markets has dropped to a fairly insignificant amount, and BTC has sufficient adoption.
There is also the argument regarding deflationary currencies and the problem with interest rates, ie if the money is depreciating then use of credit is limited. GOOD! It is the use of credit that it the basis for the hell on earth we are currently living in, loans of BTC will represent high risk ventures - so this should be limited. This means that public offerings and venture capital will be the primary source of new business ventures, that is they will be fully funded - no need for credit. With a sound money supply, then short term credit is usually supplied by real bills, which circulate at a discount to their face value and are often 90 day notes - this is a market phenomenon that has been repeated many times in history - it satisfies the need for discount credit and functions extremely well at very low arbitrage.
There is a bunch of other unsupported junk in the article - but these are the most egregious outpoints.
Good reply. The author appears to lack basic knowledge and understanding of the subject matter.
"All money is in competition in a free market, therefore BTC will compete with PM's and all other currencies."
Once you have called Bitcoin as "money" does not make sense to read your the rest of text below.
Excuse me, but you do not understand the difference between "money" and "currency". Please bother to learn more about it.
Gold is money, silver is money, and crypto is money - and nothing else is .. even though the markets are in chains, they will still give you a lesson shortly - the world is only months away from finding out what money really is ..
JP Morgan was certainly right when he expressed his axiom: "Gold is money. Everything else - a loan."
Currency - it is only instrument of government purchasing power which may change depending on the decision of the government or how many times they clicked a switch "Print".
If you think that the dollars, euros or even Bitcoin - is "a money", then you are mistaken.
The dollar and the euro - it's just Currencies. Bitcoin - it's just the technology - the platform and nothing more.
All past " crypto " super -duper encryption algorithms were originally leaky. All of them had the back doors. But the believers learned about this later.
Encryption Standard bitkoin also has a back door. And you also will learn about it later. But right now, you can continue piously believe in miracles and fairy tales from the NSA about "Satoshi".
Excellent, Amagnonx, especially with regard to the cost of BTC production (I know, I'm involved in the mining of BTC and other cryptocurrencies) and "deflation," which I put in quotes because, strictly speaking, deflation is a decrease in the money supply. Its falling prices are therefore to be distinguished from those resulting from productivity gains, which accordingly are not "deflationary."
Thus is increased productivity facilitated by sound money (whether physical or digital), as it doesn't have to battle the inflation inherent in inredeemable fiat currencies. Instead, business productivity and sound money work hand-in-hand to drive prices down, to the consumer's ongoing benefit, while producers (think computer electronics) and nonetheless able to operate at a profit. (That this would logically drive prices to zero, and thus the creation of general abundance, is for discussion at another time.)
And you are quite right about credit in a sound money economy, of course, as it would indeed be limited for precisely the reason you cite — i.e., no need for credit, other than very short-term — as the economy has transitioned from debt-based to equity-based. The result, then, would be the very opposite of what we have today, where Wall Street has all but divorced itself from Main Street. Instead, the former would once again serve the latter, and exclusively so.
DB said: ". . . business productivity and sound money work hand-in-hand to drive prices down, to the consumer's ongoing benefit, while producers (think computer electronics) and nonetheless able to operate at a profit. (That this would logically drive prices to zero, and thus the creation of general abundance, is for discussion at another time.)"
This seems like the most important discussion of all time.
Free Radical discussed it (in terms of gold) a couple years ago, to which I would add that cryptocurrencies stand to hasten the process:
What this means is not only that in a sound-money economy, prices would fall as productivity rises; it also means that in an increasingly computer-driven, nano-technological, sound-money economy – where computing power rises as machine size falls – productivity would grow exponentially, not only driving prices down at a similar rate but ultimately driving them to the vanishing point , which is to say, to zero. For example:
Let’s say that by “extremely inexpensive,” we’re talking about the solar equivalent of dollar-a-gallon gasoline in 2030. We are then talking about a less than one-cent-gallon equivalent seven doublings later and less than atenth of a cent three doublings after that, meaning that by 2050 the world’s energy needs would be met at virtually no cost. And simply put, to apply this same logic to the economy as a whole is to understand how “the economic problem” stands to be solved and how universal abundance therefore stands to be achieved. Not eons from now, not millennia, not centuries, but decades.
http://www.zerohedge.com/article/guest-post-rip-homo-economicus-end-ubiq...
This article is just ridiculous.
The whole idea of "lending money against an interest" is viable just in the fractional reserve banking system, where all the lended amount is created out of thin air.
In a system with limited amount of money a lender would end up having all the money from the money supply piled up and no clients to lend to.
You say correct, but you do not take into account that the purchasing power Bitcoin is not constant. Bitcoin - it's the same FRN, only in reverse. The possibilities are endless printing of dollars has been replaced in the Bitcoin system to the possibility of infinite division of one Bitcoin apart.
The allegation that a constant amount of Bitcoin does not allow to lose purchasing power by dividing Bitcoin it is absurd and nonsense.
Example:
- Inflation inherently increases the amount of currency in circulation and makes the currency more cheaper against goods.
- The monetary reform that removes the extra zeros of paper currency (reduces the number of fractional parts of the money) makes currency more expensive against goods.
So, Bitcoin - it's the same infinity of FRN, only in reverse.
Amen!
BTW, how do I buy food at the store or purchase goods online with the barbaric metal?
Bueller? Anyone? Bueller?
For crying out loud, if the wheels do come off one day, steel pipes will be more valuable than gold. At least you can use them to bash the fucking gold horders heads in after they run out of ammo, and then take their food...leave the gold.
leave the gold? LOL
Most people on the planet, which owns most of the land, water, natural resources and money, thinks otherwise.
I mean the whole world, not the smaller part of it, which is called "the West."
You can clean each other shoes for Bitcoin arbitrarily long and so thoroughly, as you like. But you can not buy for Bitcoin goods from China and raw materials from Russia.
They do not want to trade in exchange for any crap-coins, they want a real gold. Be-be Goodbye.
It is an anomaly in gold's 5000 year history as money that you can't buy food directly at the store with it. This anomaly is coincident with the last 100 years of FED fiat promotion and debasement. Even my grandparents used gold to buy food at the store. The last 100 years will prove to be a failed experiment in fiat money.
If someone is hoarding all the money then the money will become worthless for everyone else because they would not be able to use any money for any financial activity.
The value of money depends not only on its quantity but also on its availability.
If you have a house, a garden, and any other thing that enable you to create the things you must for supporting yourself such as: food, water, clothes, a little electricity, then money will become worthless for you.
If some single entity had 100 percent of the money and refused to trade any of it, then everyone else would simply use something else as money.
If you had 100 percent of all the things in the entire world that you could ever want or need, sure, you would not need any money. Even the Mennonites trade goods and services for money, and vice versa.
"Without a mechanism for responding to increased market demand by creating more currency, there is a fatal flaw"
Yawn. Another idiot who thinks BTC is money.
"Without a mechanism for responding to increased market demand by creating more currency, there is a fatal flaw."
Yes, that was the one sentence that jumped out at me too, especially "creating more currency" - which is little different than intervention to suppress interest rates.
The author does have a point about the finite quantity of Bitcoin though; what happens when they are hoarded and the value rises to say $10,000/Bitcoin? You want to buy a dozen eggs for $1.50 fiat but you can't afford to buy one Bitcoin? Bitcoin loses it's utility; or is there such a thing as a milli-Bitcoin?
The author also succeeds is supporting the argument for Gold as it is tangible and immutable, and though finite in quantity fungible in the sense that more can be mined and existing Gold can be melted and forged into small units of exchange.
I support alternatives to fiat and central banks such as Bitcoin but they are not without great risk and speculation; notice how .gov is going after the people behind the exchanges that allow you to convert Bitcoin to fiat and vice-versa?
A single Bitcoin is divisible down to 8 decimal places.
The smallest unit of a bitcoin is called a Satoshi - this is 0.00000001 bitcoin.
As I understand it, if it ever got to the point where a single satoshi was too valuable, they could simply add more spaces after the decimal.
Yes , that is true , note that the decimal would be placed after the zero , so no more extra bitcoins can be produced , it will simply allow even smaller divisions of a single bitcoin.
Wow, this guy has absolutely no clue what he is talking about. No where in that circular bit of nonsense does he bring up money velocity and it's equally important input to price stability.
He gives the classic NYT's deflation argument that they use against gold and every sound money proponent. It does not matter that the quantity of bitcoin is fixed, in fact it is a good thing. As demad increase remaining bitcoins increase theyre purchasing power and prices appear to fall. Oh the horror of deflation. But prices are not falling, prices are stable, the currency is simply rising, which benefits savers,which is good not bad
Between Bitcoin and human stupidity have something in common. This lack of limits.
Limit of separation on the parts (limit of depreciation) for Bitcoin - it is infinity.
And the limits of human stupidity - is also infinity.
Long live the new infinite money for people with infinite stupidity!
Your 8-bit brain could never grasp Bitcoin.
Read this earlier today and it makes a lot of sense -
"There’s a new crypto currency in town called Dogecoin
It works pretty much just like Bitcoin.
All the Bitcoin miner machines that had shut down because Bitcoins had become to hard to generate are now running again generating Dogecoins.
And Dogecoin values are skyrocketing just like Bitcoin did.
http://www.smh.com.au/technology/technology-news/the-rise-and-rise-of-dogecoin-the-internets-hottest-cryptocurrency-20140124-31d24.html
But herein lies the fundamental problem with crypto currencies. ANYONE can clone the algorithm and create their own competing crypto currency.
Soon there will be 3 competing crypto currencies, then 4, then 40, then 400, then 4000, and so on.
You see, while the inventor Bitcoin may have figured out how to limit the number of Bitcoins that can be created, you can’t limit the number of competing crypto currencies that can be created.
And this is the fatal flaw in crypto currencies – Hyperinflation of competing crypto currencies
This is why Precious Metals are much better as a store of value. Yes you may have some increase in the quantity of precious metals in circulation from mining, but the truth is, the “easy” gold has already been mined. There’s unlikely to be any more huge discoveries of Gold, Platinum, or silver.
The only thing holding back precious metals right now is the fact that the USA can print money, buy gold in London anonymously, sell it at a loss, print more money to cover the loss, and repeat as required to drive the price down to whatever it wants. This is only possible because Gold is vastly undervalued so it does not take many dollars to be able to engage in this kind of manipulation."
With this hyperinflation / number of crypto currencies I believe you'll see them depreciate in dollar terms. It's pretty simple math.
The only thing holding back precious metals right now is the fact that the USA can print money, buy gold in London anonymously, sell it at a loss, print more money to cover the loss, and repeat as required to drive the price down to whatever it wants.
True, until there is no more physical available in London.
There are hundreds of cryptocurrencies, and most of them are worthless. Untill people actually use them for real purchases of goods and services, they have no utility.
Bitcoin is by far the most useful, because it is used in the real world. Dogecoin is being used to a very small extent for charity, like fundraising for the Jamaican Bobsled Team to go to the Olympics.
Once Dogecoin crashes really hard and/or dies, I think speculation in knock-off cryptocurrencies will collapse. Only coins that provide a real advantage or new function will have last.
Bitcoin halves in new money creation every 4 years, giving until 2140 for new coins to be created, to allow transaction fees and volumes to grow sufficient to reward miners for protecting the security of the network.
Dogecoin, on the other hand, halves about every 90 days, and will stop issuing new money around July 2015. It will be interesting to see if the price of dogecoins climbs with each halving in block reward, or at what point it stops increasing in price fast enough to keep people mining it.
Yes , in the same way you could hyperinflate the amount of internet's which could exist , TCP/IP was not the only possible internet protocol , it's just the one which had the network effect first - mover advantage and now that is what we use. Once these currencies goes mainstream and scale up we will see technical problems with a lot of them which are unscaleable. Bitcoin scales up nicely , it could easily transact at VISA/Matercard speeds , none of the Alt-Coins are capable of this scaleability without using massive amounts more electricity , and I am talking thousands of times more electricity. It's almost as if the creator(s) of bitcoin anticipated in advance clone competitors so they worked out the best possible solution before releasing their code.
It takes an hour for a confirmed payment via Bitcoin, not quite on par with VISA or Mastercard.
I do agree that the attributes selected for Bitcoin seem to have been thought out in advance, unlike most of the knock-offs that have attributes assigned without real consideration for the impacts of each variable.
If you have ever used bitcoin when you make a transfer it is immediately broadcast into the network , the receiver gets the payment within a few seconds. Depending on the size of the transfer , it would be best to wait for actual miner confirmations , the higher the amount the more confirmations you want. But for small amounts this is no problem. If you wanted to transfer a few million bucks then yes you should wait for atleast 6 confirmations which would take around an hour. Still not bad , and with zero transaction fees.
Weak (low hash rate) crypto currencies will die off leaving stronger ones strong. New currencies with desire able features (like zero coin) will grow stronger. The field will not die off or fade away since it fulfills a need (fiat exit). Big money trying to avoid getting bailed in will flee into the crypto currency space since physical gold holders will not be selling at any price, and paper gold will be universally acknowledged as worthless.
The floor under the price of crypto coins and gold is the cost of production in terms of capital equipment and energy.
Fonestar, I knew that nothing you can argue me on the merits. LOL
"The Fed has been inflicting Quantitative Easing on us for five years. There are many negative effects, but rising prices, today, is at best debatable. Certainly, even where prices have risen, the increase is not nearly proportional to the increase in the money supply. Advocates of the theory explain this by saying that the money hasn’t entered the economy, it’s sitting on bank balance sheets. However, money is always on bank balance sheets in a debt-based system, so this answer is not satisfying."
Stackers is right. What the author is missing is velocity.
The inflationary pressure from printed money is negated if the velocity of money also falls in an economy. As soon as people lose trust in their money they want to get of it faster, velocity increases and inflation takes off. The end-game can happen unexpectedly as Germany found in 1921