>>21549482The fisher equation only makes sense if you don't think about it at all. Money itself is not a commodity.
PQ=MV
The price of everything (P) times the amount of everything (Q) equals the amount of money (M) times the number of times that money changed hands (V).
The first problem is is that the velocity of money isn't actually a measurable. It's just the variable that makes the equation work. It's circular logic.
The second problem is we don't really have a good definition of money. When you buy things on a credit card are you spending money, or are you just promising money later for stuff now? The quantity of stuff that is available for sale has been reduced, and the seller of the stuff has been paid, but you haven't lost any money yourself, so what's actually going on there.
The fisher equation is only really useful in teaching students how money doesn't work. Because it's very very clear that the fisher equation does not describe reality. The trouble is that the good models of inflation and money like the IS-LM model and the NAIRU model, are complicated, hard to teach, are require some pretty heavy duty math. And because they're not perfect either the criticisms of those models gets interpreted by people who don't understand them as arguments FOR the fisher equation, when in reality Fisher himself never even bothered to defend the equation.
