@Mark

Again .... following my earlier posts, we usually have two choices when wealth grows (which generally happens naturally in an economy where people work everyday); increase the money supply or and have prices rising thus devaluing the currency or allowing the value of currency to appreciate with the increasing wealth. Without inflation it would mean that it becomes harder and harder to get a shilling. This is because the value of a shilling over time would become too great.

This immediately wipes out a very important aspect of money; the ease of conversion to other wealth - liquidity. Cash is meant to be liquid to ease transactions etc. An example is the agony most Kenyans find themselves in whenever they have 1,000 shilling notes - for day to day use eg paying fare or buying a soda, the note is more of a bother than help. Imagine if the case was to be the same down to a 50 bob note (as in it takes as much trouble to get change for 50/= as it currently does for 1,000/=)

This is the reason inflation is always allowed.

Davis.