does inflation just keep working forever? What happens when a dollar becomes useless?

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For example at 3% inflation, 19 dollars 100 years from now will be worth about 1 dollar today. So spending a hundred bucks on a cup of coffee would be possible if inflation just keep happening. Will the government ever reinvent currency to “reset” the clock or will we just have to begin printing 1000 dollar bills?

In: Economics

7 Answers

Anonymous 0 Comments

In a word, yes, they can.
Though they’ll probably stop minting coins in cents.
This has already happened to several now stable currencies.

For example the Japanese Yen is a fairly stable currency for a fairly stable economy.
A can of Coca Cola cost around 120 yen.
They have 100 yen coins, etc.

Before their economy tanked due to WW2, the Japanese had the Sen, which was equivalent to 1 cent, with 1 yen being more like a dollar.

Barring any significant catastrophes, it may be that they eventually just drop the lower denominations and round up transactions to the lowest amount people can be bothered with.
Quite a significant number of people have argued this should already have been done with the US penny.
This was already done with the US half-penny.

Anonymous 0 Comments

Extreme inflation is real in many countries, right now. I think it is Zimbabwe where they printed a billion dollar note because their currency is pretty much useless. Venezuela is a similar situation, where shops and vendors will literally weigh stacks of cash for payment on goods.

Anonymous 0 Comments

I can’t recall which, but there was one country that decided to print the last 3 zeroes in red ink, and on a certain date, they just started ignoring those (10,000 is now 10). No loss in value really, as prices were listed similarly, but just a change in the denominations.

Anonymous 0 Comments

You do like Mexico did in 1993, and you just say a *new* dollar ($$ Dollar) is worth 1000 *old* dollars ($ dollar), and you issue all new currency.

Bam! Prices are back to normal amounts again.

Anonymous 0 Comments

It is just the normal thing that happens. You just stop making the small coins, because they become valueless, and change the smaller notes for coins because the notes wear out too fast. Currencies work just fine this way.

Anonymous 0 Comments

They could, but why would they need to do it? The value of your cup of coffee stay the same, the 1 dollar today would be the same value as the 19 dollar in the future. That cup of coffee used to cost 16 cent 100 years ago and now would cost 1.81$ today. Do you feel the need to reset the close so that the cup of coffee cost your 16 cent? Of course that would mean that the median income in the US would be 4,900 USD per year, meaning that it would take just as time at work to pay that same cup of coffee. Is it really important to ”reset” the currency, or people in the future will just be fine with a 1,000 USD bill and will find weird that people in the past pay stuff for 1$, just like we find it weird that people in the past used to pay stuff for a couple of cents.

The Japanese Yen smallest bill is 1,000 Yen and their smallest coin is 1 Yen. They don’t have a currency for smaller quantity than 1 Yen, they don’t have cents like we do with the dollar. That doesn’t create problems for the Japanese, it’s just normal for them.

There used to be a half cent coin in the US, they got rid of it eventually. In Canada we no longer have the 1 cents coin and everything is fine.

Anonymous 0 Comments

A penny used to be useful. You could buy things for a nickel or a dime.

That’s no longer really the case. Eventually we’ll stop minting pennies altogether, and may switch over to having dollar coins.