[seanmcdirmid]

Let's say your money supply is based on gold, which is relatively fixed. However, your economy and population keep growing. So a loaf of bread cost 1 gram of gold one your country only had 1 million people, but now you have 100 million people and the same amount of gold you are using for money. How much does a loaf of bred cost (bread production has gone up 100 times to match population increase)? (simple estimate: .01 gram of gold). So deflation has occurred. If your gold supply increased 100 times, the prices wouldn't have changed.