Asking this question from an American perspective. At an average of 2% inflation, an equivalent new car that costs $40,000 today would cost $2,000,000 in 200 years. Assuming matching(ish) wage growth (i.e. a household of two married professionals could still afford a $2M car), what are the government’s options? Let things ride? Print new $1,000 or $10,000 bills? Reissue a *NEW* USD that is worth 0.01% of the old one?
Still on the fence about if humanity will be around long enough to have this problem, but just curious about the options for my great-great-great-great-great-grandkids.
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Around a camp fire in 1988, my dad and I talked about the cost of things and we wrote down what a house cost, dinner cost, car cost in 1947 and 1988 compared to our wages.
When you ratio everything, he was 2% better off in 1947 than I was in 1988. All though long dead if he saw the house prices today as they have gone up another 10 times from 1988 to today.
So look at inflation and what it does.
1-It forces people to fight for wage increases to stay at the same economic level, people think they are winning while they are staying at the same place.
2-Money in the bank in anything other than term deposits loses value, even savings accounts that pay the inflation rate as a interest rate per year is then taxable. So you lose real value at a rate of 1-2% per year.
3-Trying to retain the real value pushes people into mutual funds which hopefully pay out more than term deposits and for me have returned 1-3% more than the inflation rate once taxes are paid.
Living in a free market economy, this financial system functions to self sustain, every opportunity to make money comes with it’s associate risk of losing the money.
You could be a little cynical and say Inflation is the process of having the average citizen treading water madly to keep their head above water, while seeing some people sink. Leaving the still breathing with a sense of succeeding while in reality they are in the same place.
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