if we always keep producing more goods why does the value of a dollar go down instead of up?

Question

Is it because governments are irresponsible and waste money by printing faster than the economy grows?

In: 0

Answer 1

It goes down because it’s supposed to. A currency is not supposed to hold onto its value over a long stretch of time. Otherwise, people would just horde their cash and not spend or invest it, which would grind the economy to a halt. A currency is only supposed to be a temporary token of exchange that allows you to trade one thing of value, your labor, for other things of value such as housing, food, and other goods and services. And that’s why central banks structure their monetary policy to have slow, controllable inflation.