It seems like everything is always going up in price. Is that because of corporate monopolies or something? Do costs of living get higher as a society becomes more industrialized/advanced?
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Inflation is a phenomena of a market economy. It seems to be necessary to have a small amount of annual inflation (about 1-3%) to grow an economy. This is mainly caused by an increase in overall money in a system resulting in the psychological phernomeon of people being willing to pay ever so slightly more for things. Think of it this way, if you are at the store with $5 and a banana cost $1, you buy the banana because it is worth your ratio of possession to cost. But if you then go clean someone’s car and make $15 for it, and go back to the store, you still see bananas are $1. But you can be comfortable bidding $2 for a banana now, so if some other dude comes in and tries to buy the last banana for $1, you might be more inclined to offer $1.25 for the banana.
When inflation outstrips real gdp growth, that’s a problem. When inflation outstrips wage growth, that’s a problem. When money becomes more valuable (deflation) it usually indicates there is significantly less of it floating around, meaning the market is in serious trouble of collapsing.
But healthy economic expansion often has this weird artifact effect of more money means prices go up. In theory, a brilliant balancing act of central interest rates may be able to completely control inflation, but why bother? Most people understand money to be a depreciating asset and so invest serious amounts of it into a home or equity or GameStop (jk). And this only helps fuel the market growth by giving liquid to companies in exchange for ownership, allowing them to make new things and in theory generate revenue and profit for your tiny piece of them (dividends). And so the system works really well with the small bit of inflation incentiving people to not stack cash in their garage. And it mostly works, contrary to Reddit opinion. Market capitalism has brought us incredible things compared to its predecessors. There are serious problems that arise from it, but that’s why the government exists, to course correct the model when it gets too harmful to society. When an absentee and complicit congress does nothing for two decades, you get problems.
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