Inflation, is the simple answer. But what causes this? Why couldn’t society just keep on keeping on with prices? Examples, a $0.25 for a candy bar, $0.75 for a fast food burger, $30k for a home etc. It worked then, so why not now, why not just agree to lower the prices of everything?
In: Economics
In short, the money supply needs to expand for economic growth to occur. Inflation is no direct guarantee of growth, but deflation basically means the economy is already in inflation. A lot of people try to apply conventional wisdom about personal finance to national economies, but the principles don’t apply the same; for instance, people saving a ton of money is terrible for the economy. Similarly, public debt isn’t nearly as big a deal as private debt.
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