Could anyone tell me how the hell inflation works? In the economic sense, I don’t get it, if prices steadily rise as time progresses. Like in 1982 a can of Coke is worth $0.25 nowadays its $1.19. The price has increased but so has everything else to keep even. So what is it’s actual value, I know inflation is not limear, but if everything raises in price at roughly the same rate, doesn’t it mean that all products technically retain the same value throughout all of history, they are fixed a set value and only artificially increase at a steady rate. Does anything ever increase in value more than its original designated value? What are the rules for assigning value to products?
Inflation happens because value can be created. The economy isn't zero-sum like some people believe. If I have something, and you have something, and we exchange those things, that's not a neutral act. We both wanted the other's object more than our own, so I now posses more value, and so do you, and the total amount of value in the world goes up. One of those things is very likely some kind of currency, by the way.
Value is a tricky thing unfortunately, it's not really possible to measure at all, so we usually just use money as a proxy for it. However, since people are trading like I just described constantly, the amount of value in the world is increasing constantly, so in order for things to be relatively stable, we increase the amount of money as well, inflating it.
I have my own problems with the way inflation goes these days, but
some inflation is a good thing. Even with the gold standard, gold would inflate as more was mined.
Does anything ever increase in value more than its original designated value? What are the rules for assigning value to products?
There are no rules, man. The value of anything is constantly shifting relative to everything else. When you're hungry, you value food, and buy more at the grocery store. The only intrinsic rule is "what will someone pay". Everything else is imposed by government. Art easily skyrockets in value all the time, and stocks regularly drop to nothing when nobody wants them.
TL;DR
* Ignore money, it's just a really nice thing to barter with
* Value cannot be measured
* Mutually beneficial trade creates value
* We inflate the dollar to try to keep it even with value
* You can charge whatever someone will pay
* There are no rules
And of course, all of this is only true when things are working well, so you can ignore everything I just said.
