[Aloisius]

As the money supply increases, all currency is devalued and everything that's denominated purely in currency loses value as well.

This is a gross oversimplification. The monetary supply can increase without inflationary effects as long as there is a corresponding increase in the production of value in an economy.

[nonsequ]

Thanks, appreciate the point. After all, part of the reason we moved away from gold as currency in the first place was its inability to keep up with economic expansion.

[reedlaw]

Like computers becoming cheaper and cheaper while the prices of other goods increase? That's just another form of inflation because the computers would be that much cheaper if it weren't for an increase in the monetary supply.

[Symmetry]

Erm, lets make this simpler. Lets say that in year 10 the economy produces exactly 100 apples and nothing else. And lets say that in the year 20 the economy produces 200 apples and nothing else. If apples were selling at $1 in year 10, then we would expect apples to sell for $.50 in year 20 with a constant supply of money[1]. We call this decrease in price deflation. The money supply does double, we would expect the apples to still sell for $1 and we would call this price stability. If the money supply were quadrupled then each apple will now cost $2, and we'll have had inflation.

[1]Well, in the real world in the short term people tend to be upset by the idea of the amount of money they receive for a good or product decreasing, so prices and wages tend not to decrease as fast as you might expect in a theoretical perfectly efficient market. This is called nominal downwards price rigidity by economists and nominal loss aversion by psychologists. This is the simplest of the mechanisms by which inflation and deflation can effect the state of the real economy.

[onemoreact]

His comment is that as long as the supply and demand for dollars remain in balance the value of the USD does not change. The reason the dollar maintains value is because people and companies need to pay trillions of dollars a year in taxes and loans in USD. Which is why despite the fed dumping a lot of money into the economy we have see so little inflation over the last few years.