Farmer A produces 10 tons of grains and sells them for $100 each. One year later Farmer A buys a new tractor and produces 20 tons of grains and sells them for $50 because of fierce competition. People decide to save $50 instead and the farmer still sells only 10 tons. 10 ton grains have spoiled because no one bought them. 10 years later people have grown old and use their savings to buy grains. The population is growing so demand is growing as well. Farmer A says I only have 10 tons of grains but 20 buyers are coming to my farm. If I raise my prices to $100 then I can still sell all 10 tons because a lot of people have saved up money. The end result? Some people have no grains and others have to pay through the nose because 100 tons of perfectly good grains that could have been sold have spoiled instead.

How can we model the spoilage of goods and therefore of the loss of value of money that represents a claim to these goods? With inflation. How can we encourage manufacturers to maintain production capacity even in the future? With inflation.