Inflation is familiar to most people through its most visible typical effect, that is, a general rise in prices. More specifically, the prices of almost all goods, as measured in money units, rise steadily. On the other hand, the price of money itself, as measured in units of almost any other good, drops just as steadily. For instance, in an agricultural economy using a currency unit known as the "dollar," the dollar prices of apples, oranges, grapes, and so forth increase. Yet the price of a dollar as measured in apples, or of a dollar as measured in oranges, continually declines. This effect of inflation is called currency depreciation or simply depreciation. Obviously, money plays a unique role in inflation, and we will begin by examining how governments intervene into the market to alter the use of money.

We saw previously (pp. 4.6:31-5) how gold, silver, and then paper money based on these commodity standards evolve as natural moneys in advanced free markets, by a process independent of any legal recognition, regulation, or intervention. After a money has become established, however, governments frequently seize control of the monetary system as an additional funding source for their political purposes.     

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