why the heck, given the massive increase in productivity(?) during the last century, we have seen inflation, not deflation?
Because the money supply increased even faster than the goods & services supply.
Goods and services are traded in an economy, but finding a way to exchange A (ex: shoes) for B (ex: chicken nuggets) is such a chore that economic activity is limited. Money is a solution, like a hub city for air travel: the easiest way to guarantee a route between all pairs of nodes in the network. Trade shoes for money, then trade money for chicken nuggets. You're still trading shoes for nuggets, but now it's much easier, which helps everyone.
Everything gets priced in money (say, "dollars"), but if something is mispriced, arbitrage takes place. Buy an underpriced thing for a few dollars, trade it directly for an overpriced thing, then sell the overpriced thing for a lot of dollars. Money for nothin'. But once others catch on, they demand trade terms that give them the profit, changing prices until they can't be arbitraged.
So everything gets priced relative to everything else, and all prices can be expressed in "dollars".
If the maker of dollars decides to increase the supply by a factor of ten and no change in goods & services takes place, You have ten times as many dollars being offered for the SAME goods and services as before. Arbitrage will quickly push all prices to where the goods and services still have the same value relative to one another but their price relative to the dollar has changed by a factor of ten. Everything is "ten times as expensive" in dollars but not in terms of what people really need: other goods & services.
If you make the same number of generic shoes, twice as many generic electronic widgets, and ten times as many dollars, shoes will be traded for ten times as many dollars ("price" goes up 10x), and even widgets go up by 5x, because although productivity made 2x as many widgets, the number of dollars went up 10x.
Because the money supply increased even faster than the goods & services supply.
Goods and services are traded in an economy, but finding a way to exchange A (ex: shoes) for B (ex: chicken nuggets) is such a chore that economic activity is limited. Money is a solution, like a hub city for air travel: the easiest way to guarantee a route between all pairs of nodes in the network. Trade shoes for money, then trade money for chicken nuggets. You're still trading shoes for nuggets, but now it's much easier, which helps everyone.
Everything gets priced in money (say, "dollars"), but if something is mispriced, arbitrage takes place. Buy an underpriced thing for a few dollars, trade it directly for an overpriced thing, then sell the overpriced thing for a lot of dollars. Money for nothin'. But once others catch on, they demand trade terms that give them the profit, changing prices until they can't be arbitraged.
So everything gets priced relative to everything else, and all prices can be expressed in "dollars".
If the maker of dollars decides to increase the supply by a factor of ten and no change in goods & services takes place, You have ten times as many dollars being offered for the SAME goods and services as before. Arbitrage will quickly push all prices to where the goods and services still have the same value relative to one another but their price relative to the dollar has changed by a factor of ten. Everything is "ten times as expensive" in dollars but not in terms of what people really need: other goods & services.
If you make the same number of generic shoes, twice as many generic electronic widgets, and ten times as many dollars, shoes will be traded for ten times as many dollars ("price" goes up 10x), and even widgets go up by 5x, because although productivity made 2x as many widgets, the number of dollars went up 10x.