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
A while ago economists decided that it’s good for currencies to devalue over the long term –
1. It encourages people to invest money in the economy to generate interest rather than just keeping a pile of money under their bed. This helps the overall economy grow.
2. Wages should grow as the currency value falls. This helps to redistribute money to working people compared to those who hoard wealth.
Now, you’ll probably notice that #2 hasn’t really been happening. Which is why inflation is considered by most to be a bad thing.
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