Can they ever be reset? Or will one day a regular chocolate bar cost for example €50? House that costs €200k cost €1,000,000? Will the likes of the euro or US dollar one day be the same as currencies such as the YEN where “1” of them is essentially worthless?
In: Economics
Inflation affects things in different ways and isn’t uniform.
House prices are more volatile than chocolate bars and house price inflation has been well above the inflation rate for most of the past 30-40 years, but is also prone to crashes that would not be seen in the chocolate bar market.
But since an ideal economy has an annual inflation rate of 2-3%, then yes eventually (assuming few economic shocks and no replacing of the currency) a chocolate bar would cost €50.
Comparing the euro and dollar to yen is a bit difficult. Japan has undergone periods of deflation (which is bad for an economy), and still had a yen to dollar conversion in the thousands.
What we’ve seen lately is a fall in the value of the yen relative to the dollar/euro which has made Japan cheaper for foreigners when converting from their own currency (so the value of 1 yen is low in absolute terms, but the value of an average european or american salary compared to Japanese prices is suddenly higher). Whether a euro or dollar will ever be equivalent to 1 yen in the future will depend on the future values of both currencies.
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