Inflation is compounding, too...

In my ideal world, currency should deflate.
Think about it this way, if the currency in circulation stays the same, and productivity grows as each of us improves in our skills, knowledge and technology used, the same dollar should have more buying power year after year... right?
Why then, does it inflate?

Perhaps we can understand this from the government point of view:
Deflating currency does not encourage financial activity, it's about the mindset of us the general population. if i keep this dollar and it gains buying power year after year, it is a powerful motivation to save up. If the whole population reduces spendings, the whole economy would be sluggish.
If inflation is too high, the economy will then be highly unstable.
It is carefully and deliberately managed to a certain range each year in effort to encourage a lively and stable economy with each of it's population highly engaged to the economic system.

That is also the reason behind the saying "savers are losers". You literally lose a few percent of your savings each year. That encourages us to put our money into the market, businesses; putting them at risk, or you probably risk living most (or all, if you die working) your adult life in work you probably dislike, almost like a puppet.

So if you plan to be involved in the market looking to grow your wealth, or to counter inflation, you better be good in this whole concept about risk management.