Because the people on earth have created value through work and so the money supply needs to increase to represent the additional value that has been created through that work. If you cut a tree down and, through work, turn it into a table — then you created value where there was none before.
So the money supply must increase to represent human endeavour. That’s effectively what central bank interest rate rates are.
In a perfect world, we’d have an exact balance between work/value and money creation. Unfortunately, it’s not a perfect world.
As others have noted, deflation is problematic because people hoard money with the expectation that the value of the money will be more tomorrow. This reduces the activity in the economy. So a balance between money supply and endeavour is a reasonable solution. It doesn’t make money appear to be rare.
Because the people on earth have created value through work and so the money supply needs to increase to represent the additional value that has been created through that work. If you cut a tree down and, through work, turn it into a table — then you created value where there was none before.
So the money supply must increase to represent human endeavour. That’s effectively what central bank interest rate rates are.
In a perfect world, we’d have an exact balance between work/value and money creation. Unfortunately, it’s not a perfect world.
As others have noted, deflation is problematic because people hoard money with the expectation that the value of the money will be more tomorrow. This reduces the activity in the economy. So a balance between money supply and endeavour is a reasonable solution. It doesn’t make money appear to be rare.