*optimally*, the money that gets created *exactly* offsets economic growth. That keeps everything costing the same.
If you were to use, say, gold, then there's only a set amount of it, so for every person you add, the price of every item would go down.
The reason that there isn't *massive* inflation at any given time is generally that yes, loans get paid down and the economy grows in rough proportion to money creation. The system is (roughly) at equilibrium.
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Date: 15/2/12 02:23 (UTC)*optimally*, the money that gets created *exactly* offsets economic growth. That keeps everything costing the same.
If you were to use, say, gold, then there's only a set amount of it, so for every person you add, the price of every item would go down.
The reason that there isn't *massive* inflation at any given time is generally that yes, loans get paid down and the economy grows in rough proportion to money creation. The system is (roughly) at equilibrium.