Switchcraft

Exactly!

ScratchMonkey

Anyone who uses pennies now uses fractional amounts. It doesn't make any difference if the fractions get smaller. You can call the smaller units something else if it makes you feel better.

I don't contest that. That's true of any commodity. The value of everything is subjective. (Including labor, for the "fair wage" crowd.)

And where will this inflation come from, if not from the money-printing Feds? The economy grows because people get more productive, not because the supply of an imaginary commodity gets increased through legalized counterfeiting. All that counterfeiting does is to make the system "noisy" (in control system terms) by removing the ability for participants to predict the supply of the price communications medium. It is hubris on the part of the Fed to think that it can respond to economic conditions faster than the millions of actors directly involved in the market.

Of course, a lot of people are now addicted to inflation, in much the way junkies get hooked on free samples of drugs. That's why a sudden return to hard currency would hurt borrowers. We'd have to decide whether to wean them off the debt binge or go cold turkey, neither of which is politically palatable.

Another approach is to lock inflation at a particular rate. The value of the currency still drops, but it drops at a fixed and predictable rate. The market adapts to this steady drop, just as it always has.

The only way for inflation to continue to "pump" the market is if you keep accelerating it in a way that borrowers can't adapt to. Recessions arise when the Fed pulls back from such hyperinflation. Better to eliminate both recession and hyperinflation and just stabilize the supply.

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RandomGuy

In control system terms, the central bank is the controller, the market is the plant, inflation is the feedback signal and the money supply is the control signal.

The market on its own does not create stable inflation. That's why this control system was built. You may disagree but this system has proven pretty effective in practice.

This is the goal of the central banks. The system has a better response to a steady ramp refernce signal rather than a fixed value reference.

I like the Bank of Canada's policy explanation much better than the Federal reserve's. I'm pretty sure all their fundamental principles are the same.