A stack of US dollar bills are seen during an AFP interview with North Korean defector Park Sang-hak in Seoul on June 25, 2024. Park considers the propaganda balloons he floats into his homeland to be part of a tradition of psychological warfare, and vows to keep going until Kim Jong Un’s regime falls. The son of a North Korean double agent who escaped his country in 1999, Park has been sending balloons loaded with anti-regime propaganda leaflets, US dollar bills and USB drives of K-pop across the border for nearly 20 years. (Photo by Anthony WALLACE / AFP) / To go with ‘SKOREA-NKOREA-DIPLOMACY-CONFLICT, PROFILE’ by Kang Jin-kyu and Cat Barton (Photo by ANTHONY WALLACE/AFP via Getty Images)
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The length of the foot doesn’t decline if the number of foot rulers produced exceeds demand for foot rulers. That’s because the foot is a measure, a fixed concept of length, nothing else.
It’s useful to remember that money, like the foot, second, and tablespoon, is similarly a measure. Nothing else.
Which is why it’s unfortunate that even the wise proponents of a dollar price rule contend that the latter will be achieved by Treasury, the Fed, or some governmental monetary authority literally buying and selling dollars each day to maintain a specific dollar price in terms of gold, or some other measure. Not only has this never been done, it’s also not necessary that it be done.
For much of the U.S.’s history the dollar had a fixed definition in terms of the constant that is gold. Remember that. Gold served as the foot for money.
Up until 1933, the dollar was measured as 1/20.67th of a gold ounce. Notable about the previous measure is that it’s not as though FDR, Treasury secretary Morgenthau, or Fed Chair Eugene Black printed voluminous dollars so that the latter would be 1/35th of a gold ounce once FDR devalued in 1933. As opposed to a market event, historical accounts indicate that FDR redefined the dollar in his bathtub.
Such is the way of things with measures. If it were ever decided that the foot should be ten inches, those who define length wouldn’t print feet as much as they would alter the definition of the measure.
To which those who believe supply and demand sets the value of the dollar will respond that the Fed, because it can allegedly control the “supply” of dollars, in fact controls its value. It all sounds neat and logical, but for the fact that the Fed can do no such thing.
If it could, a Fed that employs Keynesians appointed by Keynesian politicians would be routinely controlling the “supply” of dollars in poor places with huge surges of so-called “dollar supply.” Keynesians believe “putting money in people’s pockets” so that they’ll spend is the path to growth, so supplying us with dollars the Fed would do. Except that it doesn’t, nor could it.
Dollars in circulation aren’t supplied, rather they’re an effect of production. That’s why there’s a lot of them in Beverly Hills, and relatively few of them in Baltimore. The latter calls into question the odd, but popular notion that a Federal Reserve never charged with doing anything associated with the dollar’s exchange value, adds and subtracts dollars from the system to maintain a dollar price. No, that’s not what happens. And it’s never happened. Really, how could it?
To suggest a monetary authority could match so-called “money supply” with “demand” suggests that central planning not only works, but has always worked. More realistically, money is always and everywhere circulating where producers are precisely because producers want roughly equal value for what they bring to market.
Back to the dollar, it’s what the issuing government wants it to be. As with FDR, President Trump wants a weak dollar and has appointed people to positions associated with money (think Steven Miran) who share his views. Markets looking into the future price the concept that is the dollar based on Trump’s errant beliefs.
Which means that if Trump ever reverses course on his dollar confusion such that the dollar rises, supply and demand will have nothing to do with it. Markets will merely adjust the greenback to the possibility that Trump is happening on the realization that money can in no way alter economic reality as much as it can measure it.
Source: https://www.forbes.com/sites/johntamny/2025/09/28/no-such-thing-as-dollar-supply-and-demand-theres-just-production/
