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
- Credit expansion in country A
- Prices in A increase
- Increase in imports from country B because foreign goods become cheaper
- Country B redeems A's currency for gold. Hence gold outflow from A to B.
What I am confused about is how does inflation lead 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?