[gahahaha]

It didn't use to matter much. Consistent inflation is a rather new phenomenon that basically only appeared after WWII. There was for example almost no inflation in Britain between 1814 and 1914.

For the record, in case there still are Ron Paul fans/goldbugs out there: moderate inflation is generally considered a good thing by economists today and inflation is probably too low at the moment.

[msandford]

Personally, as a reductionist, I like the idea that money is somehow permanent. Maybe economists like inflation, and perhaps it is "good" for the economy overall. But the idea that a dollar saved today can buy roughly the same amount of stuff in a decade or a century seems like a powerful idea to me. To me that seems like a goal that's worthy of pursuing because then money becomes a true abstraction that's not leaky. And because of the way my brain works, I see that as incredibly useful. Not having to always inflation adjust things, not having to do this or that, not having to worry about how much retirement you actually have versus how much you think you have, etc. I understand that for various reasons few other people want this, but that doesn't convince me personally otherwise.

One person described money as "sweat, distilled" and I find that definition incredibly attractive. I recognize that plenty of people making money not by sweating but thinking or whatever, but I still find it an excellent description. And I can't see how devaluing a person's effort over time is a viable strategy for building a lasting civilization. I think it leads inevitably towards the kind of throwaway society we have here in the US and virtually guarantees that we won't build infrastructure of long lasting value like exists elsewhere in the world. Well built stuff can last for hundreds or thousands of years. I wish money was the same.

[hsk]

One aspect of inflation is that it is a tax on people who choose to hoard their money. Because inflation naturally makes every dollar worth less and less over time, you are forced to either spend it now or invest it somewhere that grows with inflation. As a result, money is actually utilized instead of sitting in a bank account.

Thus, I think the idea that a dollar saved today can buy roughly the same amount of stuff in a decade is actually bad, because in a world where that's likely, that dollar was probably sitting useless in someone's purse for a decade.

Inflation, in my opinion, actually does the opposite of what you suggest -- because it encourages lending and investing in order to beat inflation, money is actually put to use for longer term projects such as infrastructure that can last years and years.

[simonh]

It might seem like a nice idea that cash stuffed in a mattress for a few decades would keep it's value, but that's not beneficial to society. Encouraging money to be invested in order to earn a premium, and stave off inflation, is a good thing overall because it puts wealth to work creating jobs and stimulating economic activity.

[hga]

Expanding on that, I came of age during the '70s where I believe the major transition in inflation expectations occurred, and being numerically literate, I have a feeling for how the value of the dollar declined (which I frequently reify with this calculator http://www.bls.gov/data/inflation_calculator.htm but know the government understates it, see below for one example).

When I see, oh, normal genre 300-500 page paperbacks going for Amazon prices from 8-11 USD, mid '80s official inflation adjusted prices of ~$3.65-5, and lower actual prices from a quick check of my library, my response to the higher end is not no, but hell no, and I'm not going to buy the lower end new for all but the most exceptional titles.

Many economists think deflation causes people to hoard their money, since an item bought tomorrow will cost less (assuming your form of storage survives, $N in a bank that goes bust before the FDIC was established is worth $0), and the reverse for inflation. I think it's a lot more complicated than that.

[anigbrowl]

On the other hand, when you consider what money is an abstraction for - economic resources - inflation doesn't seem so unreasonable. Consider one fairly standardized resource unit - a barrel of oil. Crude oil lasts pretty well, but refined oil products definitely have a shelf life. Food commodities are of course perishable, and real estate can often lose use value if buildings aren't properly maintained. Of course this is not to say that all resources are perishable or perishable to similar degrees, but nature does impose 'use it or lose it' conditions of its own.

The other thing to consider is that any decision to wait has an opportunity cost, and the baseline opportunity cost is captured by the interest rate. Since nobody is going to stop charging interest to borrow money - even in sharia finance you pay a rental cost for money that is very very similar to interest - it would seem as if price inflation was an unavoidable characteristic of any system involving credit or loans.

[ArkyBeagle]

But permanent with respect to what? US GDP is 16.77 trillion. In 1950 it was $.3T. Ratio is 55:1. Population is only approximately 2:1. That's a compounded growth rate of 5%. So really- just to break even and make a dollar mean the same thing, we'd need an average money supply growth of 5% ( which is not the same as inflation ). But all the prices will be radically different - some more, some less.

[Spooky23]

No inflation encourages the type of behavior that we're seeing today -- hoarding of US dollars.

Gold as currency had lots of really negative effects, read up on the populist movement in the late 19th century U.S. and the background of the "Wizard of Oz" story.

[GnarfGnarf]

Money is a measure of power. With money, you can make people do things for you. People don't crave money for its own sake. They crave money for the power it gives them over others.

[mikeyouse]

There was a period of low inflation during that time frame but it temporary and isolated.. There were huge inflation swings before, during, and somewhat after that time..

http://imgur.com/HLfnO6R

[gahahaha]

I think you'll observe that there are periods of inflation offset by periods of deflation, meaning that over time the value of money was somewhat more stable than your image implies.