> Keeping cash balances is undesirable because of the opportunity cost not because of inflation.

I don't get this statement. IMO it's undesirable for both reasons.

From the point of view of holding USD on a savings account -10% inflation (aka: 10 deflation) is the same as 2% inflation with savings accounts that reek in 12% interest rates. You're arguing that nobody in the world should want to have such a savings account? Everybody should invest it in something at a risk-free rate? You mean a risk-free investment? I'm not sure what that means.

> And I don't agree that central banks are failing to maintain price stability.

I'm talking 2020 - 2021, as in: right now. The data you link goes until 2019 pre-corona, pre-helicopter-money times.

Here in Europe there's without a single doubt in my mind stagflation going on right now (prices that rise faster than the average income).

Holding cash in a bank account is IMO a guaranteed significant loss of purchasing power right now. If you take 1 look at past year's commodity prices, you'll see that the market agrees with me.

Year over year examples: lumber spot price up 300% up, silver 74% up, gold (the gold standard for measuring inflation) 5% up, housing prices 10 - 30% up, wheat price 25% up, and so on and so forth.

Does this mean all these things have all of a sudden become more desirable? No. Does it mean the USD/EUR/etc have lost buying power? IMO very big yes.

The opportunity cost of cash is the return that you would have earned if you had invested in a risk-free asset instead of keeping the cash. By keeping cash you incur such a cost, whether there is inflation of not, and this means you should always keep as little cash as possible regardless of inflation. For example, if the inflation rate is -10% and the return on a (risk-free) savings account is 1%, then you are incurring an opportunity cost of 1% annually by keeping cash balances. If the inflation rate is 10%, you are incurring the same exact cost. So while cash balances can absolutely depreciate as a result of inflation, cash balances should represent a small fraction of a household's net worth anyway, since it's not optimal to hold large amounts of cash. Therefore a modest rate of inflation, such as we observe in developed nations, is never going to have a significant impact on household balance sheets, compared to other forms of depreciation such as the normal depreciation of physical capital (e.g. houses and cars).