Money is difficult to explain to others who do not understand it. I don't think I could do it myself to be honest, but I'll give it a try. Maybe over time as I continue to write, I could explain it better & better.
Throughout time, money has changed forms many times. In the beginning, people used things that seem ridiculous to us nowadays. But that was a different world back then, than it is today. Centuries ago, people didn't have the technology & exploration resources we do today. In 1871, an Irish captain imported stone coins to the Yap island. This island used stone coins as their native currency because it was scarce to just this Island. However, when someone brings in these stones from outside the island to what they used as their native currency on this island, this created what is known as hyperinflation. On this island, their native currency became worthless because there was so much of it. Stones are a bad currency.
This happened to many regions around the world that had scarce resources in their region, travelers from outside brought in more & more of these resources. Inflation was created xfold. This led to the standard of gold, silver & copper as a means of trade. These metals are scarce to our land. People have been mining these metals for centuries, no, thousands of years because we found them to be valuable and rare. It takes work to mine these metals & more work to melt them down & shape them the way we want them to be. Metals cannot be created out of thin air like paper, or gathered from just about anywhere like stones. It takes a lot of work for people to mine these metals which made it worth working for. It cannot be created, only mined which is why people find it valuable. For many years people have used gold as a means of exchange. When gold was to the point where it cannot be used to purchase goods & services as small transactions, people used other metals like silver & copper because these metals had a higher supply than gold. However, that supply was still limited & valuable. It still came to the point in which these metals couldn’t be used for small transactions like a loaf of bread.
When the time came to where many small transactions we're taking place, these metals could no longer support trading. This led to being a banknote. A banknote is created by a central bank which stated how much of a portion of gold was in value in the number of that note was held in a central bank. When the world was on the gold standard you could take a $100 bill to a bank & you could get back $100 worth of gold. This is no longer the case as president Nixon in 1971 removed the US from the gold standard & led to an inflation of the US dollar which was now not backed by anything. Because money was now not backed by anything, countries could increase the supply of their banknotes at will as they felt they wanted.
With an increasing supply of currency, it's purchasing power decreased. This is why we see the price of goods & necessaries increasing year after year. This is why McDonald's removed the dollar menu.
Here is an interesting topic that I did not know about. It's called "shrinkflation."
I like to use McDonald's as an example of many things because I worked there for a while and well... I'm still lovin it. My grandma tells me that the size of a big mac used to be the size of a whopper at burger king. If you go to both, you know that a whopper is a pretty big burger now, & the size of a big mac is pretty damn small. It's like a regular cheeseburger with two patties & a middle bun just to make it taller & look bigger. McDonald's decreased the size little by little to an unnoticeable rate so people may not realize it changed in size. The price as well has changed too. During the time I worked there, for a regular big mac just the burger used to cost $3.79. In a matter of a few years, that price increased to $5.79 while the burger decreased in size about 20%. This is what is called shrinkflation. Decreasing the size of a product while also increasing it's the price tag.
This is a hard concept to explain, & I didn't totally understand it myself nor did I explain it as a professional but as I learn more & more I hope to write better & better.
What are your opinions on this subject of inflation? How has this impacted you in your life? Have you noticed shrinkflation in your life? Please, let's have a conversation about this in the comments below.