Why if I have $100 right now, 10 years later that same $100 will have less purchasing power? Why can’t our money retain its value over time, I’ve earned it but why does the value of my time and effort go down over time?
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Managing inflation is actually really hard. Most countries do their best to keep it at 2% year over year, but when the shit hits the fan there’s no real be-all end-all solution to it.
Inflation has been a problem ever since humanity’s had an economy. The romans had inflation but didn’t really know what was going on. They thought it was simple: outlaw rising prices, create larger denominations (instead of 5 “dollar coins” create 10 “dollar” coins.) but these practices don’t help. They hinder, actually. If you outlaw rising prices, then the seller stops making a profit, if the seller stops making a profit, they shop closes, losing jobs, shrinking the economy. Making bigger denominations just helps to create hyperinflation. Hyperinflation *sucks*. The prices for things will change daily, until that amphore of wine that cost 20 “dollars” 5 months ago now costs 100.
This is something that happened/is happening in south america starting in the 1960s. A combination of dodgy govermental policies and human psychology perpetuated a cycle of hyperinflation. The government was printing money hand over fist to pay its debts, leading to hyperinflation. And it lasted for so long that people started to incorporate it in their daily lives, ironically creating more hyperinflation. If your whole life the price of milk changed every 12 hours, you keep changing the price every 12 hours, even if there’s no actual underlying reason to do that.
It’s better to try to keep a little inflation since it encourages investment back into the economy. If your 1000$ becomes 9980$ the next year, you’re more inclined to try to make it grow by either using investment portfolios, or other investment opportunities, which helps to create other jobs, which grows the economy.
Regarding the “why” inflation happens… that is a big question. There are a *multitude* of factors, and if someone tells you that they know exactly why inflation happens, you’re either dealing with a liar or an idiot. The big main reasons is that humans will always be human. If a good lumberjack wants a raise, the price of wood increases, if the price of wood increases, the price of timber increases. If the price of timber increases… and so on and so forth. Inflation is so hard to predict and control because it comes from such granular sources so many steps under “the price of bread is 8% higher than it was last year” that it’s impossible to track down.
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