Money originates in one of two ways. One way is by depositing gold, the value of which is credited to the depositor on a bank account. However, the bulk of the nation's "purchasing power" stems from credit extended by banks,! be it by loaning funds or by purchasing securities (bonds).
Galloping and creeping inflation
In the summer of 1923, the German inflation was rapidly heading toward the grand finale: total repudiation of the currency. As an instructor in a Berlin college, this writer drew a monthly salary that had been raised from an inflated 10,000 marks or so in early 1922 to 10,000,000 marks by July, 1923, and the whole amount was being paid twice a month; then, once every week; then once each day.
The next step to meet the skyrocketing living costs was to pay us twice a day, in the morning and in the afternoon. Just after 5 P.M. one day in late August, 1923, I was walking down the staircase of the school, carrying the day's second haul of ten million marks (the day's first paid for a modest lunch), when the professor of physics overtook me. "Are you taking the streetcar?" he asked. "Yes," I said. "Let's hurry. The fare will be raised by 6 P.M. We may not be able to pay it."
It may be one of the most familiar words in economics. Inflation has plunged countries into long periods of instability. Central bankers often aspire to be known as “inflation hawks.” Politicians have won elections with promises to combat inflation, only to lose power after failing to do so.
Economics is the study of the market economy.The market economy refers to an abstract image of interaction among purposeful, "normal human beings," or actors, under a given set of conditions. The set of conditions are four:
a system of private property rights,
the use of money
free enterprise .