Inflation leads to loss of gold reserves

Question

I am reading Murray's Rothbard "What has government done to our money?" and this is his reasoning for inflation leading to loss of gold reserves to other countries (assuming everyone is on gold standard)

Lets assume everyone is on gold standard. Then

1. Credit expansion in country A.
2. Prices in A increase.
3. Increase in imports from country B because foreign goods become cheaper.
4. Country B redeems A's currency for gold. Hence gold outflow from A to B.

What I am confused about is how inflation leads to increase in imports in 3. As monetary supply increases, A's currency would lose purchasing power and so imports would become equally expensive at that point. Why would that not be the case?

Answer 1

Inflation won't necessarily change the price of goods from country B in real terms, but it will change the relative costs of buying goods from country B now vs saving now and buying goods from country B later.

Under the gold standard, there are no central banks to force the interest rate up when inflation rises. If inflation goes up but interest rates don't go up, then consumers in country A will save less and spend more, leading to a temporary increase in imports from country B.

Answer 2

The relative increase in inflation of goods in economy tends to be higher than the depreciation of its currency , this increases imports , however if this situation continue for long periods , the currency depreciates due to trade deficit