Value without Inflation

There is no inflation in Sensible Taler currencies. Neither monetary inflation nor price / purchase power inflation are permitted.

The original meaning of inflation is what we now refer to as monetary inflation; it is the creation (or continued existence) of money for which no underlying value guarantees its full backing (anymore). It is lucrative to create unbacked money, especially for the party creating it, because it increases purchasing power at no expense. Likewise it is interesting to create partially backed value, because it multiplies the purchasing power for that one party.

To all but the one introducing surplus money, the situation is unattractive, because they see more money available in total than the total value that it represents. The ratio between money and value will eventually adapt by demanding more money for goods aand service, in that average ratio, for the same value. In other words, the purchasing power of the money is eroded. Inflation is a one-sided advantage to the party creating the surplus money and it spreads the disadvantage over all other users of the money.

Avoiding this power to create momey is precisely why old currency systems relied on precious metals, rare shells and such. It was not until the introduction of paper money that the idea of partial backing was even possible.

The term inflation was invented to refer to the blowing-up of the money supply all by itself. Nowadays, the term is confusingly used to (also) represent the increase of prices, or the reduction of purchasing power, but this only happens when the ratio between currency and underlying value erodes.

In a system with full backing, inflation does not happen.

The great difficulty of monetary inflation is that it is attractive to add money, but equally unattractive to take money out of roulation. This is why sensible money must be founded on something self-evident or, where appropriate, the removal of backing cleans up after itself, with localised disadvantages so it does not spread. Precious elements like gold can be recovered from form if it persihes at all, which means the value is pretty much guaranteed. Human attention is offered by a particular person; when that person is taken out of the monetary system then the losses are not anonymously distributed over all.