As Friedman’s example shows: symbols may be important in monetary matters. At the same time, irrespective of the particular symbols and media to which money functions are attached - be it stone wheels or computer chips - money is ultimately a question of trust. The euro’s current existence as a “non-tangible currency” perhaps makes this point - which is valid for any fiat money - more plain and obvious. No matter what specific medium of exchange a society might wish to adopt, the efficiency of money in facilitating economic transactions via the price mechanism depends on its stability as a unit of account, i.e. as a common financial denominator, for the economy. In order to hold and accept money economic agents must not only be confident that money remains accepted as a medium for exchange, but also be confident that money will retain its value over time, thereby ensuring that price signals can provide accurate guidance for markets to function efficiently. In contrast, if money loses its value, this also undermines its usefulness for exchange. Indeed in periods of very high inflation currency tends to be replaced, for example, by cigarettes or other goods - or, perhaps, “bads” - in everyday transactions. An inflationary currency will simply cease to be accepted in transactions notwithstanding any legal tender provisions such as those written on the dollar bills. I am old enough to remember such a period in post-war Germany, before the currency reform of 1948.
They are associated with the fact that expanding demand in many industries exceeds their potential to ramp up output and imports. This accelerates price growth as well. As to the product groups where prices rose the most in the second quarter, these are construction materials, furniture, and cars. When people expect prices to rise faster, they decide to make large purchases earlier. To do this, they use both savings and borrowings. Growth in consumer lending again sped up to a quite high rate, which was driven by accommodative monetary policy, among other things. On the other hand, accommodative policy lowered the demand for bank deposits, especially given accelerated inflation. There are also other markets where price growth was rather caused by one-off factors and limited supply. This is tourism, for instance. Only a part of foreign destinations have been reopened, whereas Russian resorts’ infrastructure is still insufficient to accept the entire tourist flow. As a result, prices for tourism services soared, which also sped up inflation in June. Furthermore, May—June recorded a surge in prices for such vegetables as cabbage, potato, carrot and beetroot, which was because 2020 harvest stocks started to end before the new harvest supply. However, the contribution of such one-off factors to overall inflation is smaller than that of steady factors. The increase in prices for these everyday products is very noticeable and significantly impacts inflation expectations.