Crash Course Chapter 10: Inflation

Most of us think of inflation as rising prices, but that’s not quite right. Inflation is not caused by rising prices. Rising prices are a symptom of inflation. Inflation is caused by the presence of too much money in relation to goods and services. What we experience is things going up in price, but in fact, inflation is really the value of your money going down, simply because there’s too much of it around.  Inflation is, everywhere and always, a monetary phenomenon.

From 1665 to 1776 there was absolutely no inflation. For 111 years, a dollar saved was, well, a dollar saved. Can you imagine what it would be like to live in a world where you could earn a thousand dollars, put it in a coffee can in the backyard, and your great- great grandchildren could dig it up and enjoy the same benefits from that thousand dollars as you would have 111 years previously? This was reality in the US at one time.

But along came a war. And another. And another. And another. And then another war even bigger than any before it, which again proved inflationary, but this time, something odd happened. Inflation did not retreat before the next war began.

Fast forward to the present day, past several additional wars, and into our current situation. Inflation is now a permanent feature, and because it advances at a percentage rate, your money is exponentially declining in value. What does it mean to live in a world where your money loses value exponentially? You know what it means, because you live there.