# Determining and Exchanging Value in the Digital Age, and the Man-Made Problem of Inflation

/What if currency is a bad way to track value in the digital age? It was fine for when one goat cost 3 [currency units] for decades or maybe even longer, but now, in the digital age, that is no longer the case. Currency is devalued every year, at an exponential rate, thanks to inflation.

A flip lighter can sell for $9 in 2018, but in 2020, the price may rise to $9.50 if everything else remains equal. The customer gets no more or less value when they buy the 2020 lighter vs. when they buy the 2018 lighter. Nonetheless, they pay more because the value of the dollar fell by an arbitrary amount over that time, and so a slightly higher amount of dollars is needed to indicate the same amount of value, and the next year, that amount of dollars will rise again, as it will the next year and so on, as long as we are around to see it. Next thing we know, that same flip lighter will cost $5,000 thanks to the ever-increasing march of inflation, and it will cost $5,100 the next year, and so on - based on an inflation rate of 2-3%.

Consumers will still need to be able to buy that lighter of course, so their wages will also rise to at least attempt to meet inflation. $5 million yearly earnings will one day become the norm, but not because people are earning more or have more value in their lives, but simply because it must be, to keep up with the cost of goods. Those workers will be creating the same relative amount of value that they are, right now, in 2018, but the number that represents that value will arbitrarily grow higher, ever-shrinking the value of a single dollar until stopping to pick up a $1,000 coin won't even be worth the time it takes to do so.

Physical money will one day become obsolete - not because electronic payment methods are better or more convenient or what have you - but because the currency that they represent will devalue so quickly - inflation is exponential after all - that after a few years in circulation, a new bill with a higher value will need to be printed and the lowest value scrapped, more and more quickly each time.

I'm not describing some sort of hyper-inflation scenario - though that has happened in the past. What I’m describing is the reality that the entire world will face, and that some countries - places in which the value of one currency unit is minimal at best - already face.

Mathematics predicts it with absolute certainty. Imagine we have $100 in a bank account that pays 2.5% interest. After one year, we get $2.5 in interest, making our total $102.50. The next year, our interest isn't calculated on the original $100, but the $102.50 that we now have $105.0625. The next year, we'll have $107.69. After 20 years, we have $164, and after 50 years we have $344. All on its own. Now imagine that exponential growth being applied, in reverse, to the value of one dollar.

That's inflation; an arbitrary number that forces all prices - including the cost of labour - to climb ever higher, simply to keep up with each other. Why does an item cost more to buy now than it did 2 years ago? It's because it costs more to make it. Why does it cost more to make it? That's because the price of items rose, increasing the cost of labour to match. This increased the selling price, which requires higher wages, which in turn increases production cost and therefore prices, so on and so on… Prices rise, not because more items are produced per period than before, not because workers are working longer or harder, but because that’s just what prices do.

So considering all this, is an ever-faster-devaluing, ever-changing number-based measure of value – which is what the dollar, or the yen, or the euro, all are – really the best way to measure the value of goods, services, and labour? Who is enriched by ever-increasing numbers that more or less balance out and so, in the end, mean nothing?