If the ideal inflation rate is around 2%, won’t money eventually become worthless?
In: Economics
Yes and no. There’s a few ways to deal with currency inflation, the ones that generally happen are:
1. Drop smaller denominations. Many places have been eliminating smaller coins as their value drops below usefulness (or the scrap value of the metal they’re made from). NZ dropped their 1 and 2 cent coins decades ago and now doesn’t issue anything below a 10c coin
2. Currency revaluation. Basically, you make a new currency called “New Dollars” that replaces old Dollars and set it to being worth a suitable amount of old Dollars to bring the numbers back to something convenient to use again. e.g $1 New = $1000 old and stop issuing the old currency
3. Make bigger notes. Places with more rapid inflation have gone as high as 100 Trillion units notes in their local currency before giving up and ditching the currency all together. (see Zimbabwe or Germany between WW1 and WW2)
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