The Truth About Economics: Part 7 Inflation Through History

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(See Comic) As the Roman Empire over expanded and eventually fell, the metal content of its coins shrunk; its currency became worth ever less due to excessive supply. In other words, the Roman Empire had inflation issues. As time went on they started making the coins of cheaper metals, they made them smaller, and they even started clipping coins. Mark Twain once said, “History doesn’t repeat, but it does rhymes.” And history is rhyming today in the United States. Today, it costs more to make pennies and nickels than they are worth at face value. In other words, they are worth more for their metal content than face value. Consequently, a law was implemented in 2006 to make melting down coins for their metal illegal. Years ago, when the United States had sound, constitutional money, the metal content of coins is what made them money, not the face value. money market interest rate Inflation has been a recurring problem throughout history. Approximately every 200 years, there has been a big wave of inflation driving prices higher followed by a period of relative price stability. These inflation waves have usually corresponded with population booms and usually ended in some variety of disaster, such as war, famine, disease, and so on, which reduced or stabilized the population. Population booms cause a number of problems involving price inflation. For one, it means more demand for basic goods, like grains, causing supply and demand issues. And two, it often compels governments to spend and print more money and thus go into debt to accommodate the booming population. This debt leads to currency debasement through oversupply, and acts as a hidden tax. investing online Price of Consumables in England 1200-2000 Logarithmic In a sane world with a stable population and sound money, the prices of most things would just get cheaper and cheaper. Steady productivity increases would lead to an abundant supply of goods, which, in turn, would allow people to get away with working less. Unfortunately, the world is not sane and people sabotage their own well-being by facilitating self-defeating behaviors. Coming Next: Part 8, It’s not just The United States