Inflation

From EU2Wiki

Inflation in EU2 is a factor which makes almost everything more expensive. Inflation starts at 1.0, and cannot go lower than that. It can easily go higher. Inflation in the game is usually given in "points", which are each 0.01 inflation. Thus, in the "corruption" random event you must choose either a point of inflation, or to lose 100d. If you choose the inflation and your inflation is currently 1.05, it goes to 1.06.

Effect of Inflation

Inflation acts as a multiplier on the cost of practically everything in the game: armies, navies, tech, stability, tax collectors, missionaries, manufacturies, etc. (The only cost I am aware of in EU2 that is not altered by inflation is making peace; there, 25 ducats buys 1% warscore regardless of inflation in the two countries.) Thus, one effect of inflation is that it in effect decreases your current cash balance. If you have built up a warchest of 1000 ducats, and then you inflate for a year, then your warchest buys approximately 1% less than it did before, i.e., it is worth 990 of the pre-inflation ducats.

Increasing Inflation

The primary cause of inflation in the game is minting, that is, directing monthly income to the treasury. If you mint 100% of your monthly income for a month, then that income is turned into ducats in your cash balance. At the same time, you get 1/12 point of inflation (0.000833 inflation). If you mint less than 100%, you get a proportionate fractional reduction in both the amount of ducats you get, and the amount of inflation you suffer. You can see the projected effect of minting, by setting the Treasury slider then mousing over it. The tooltip will show how much income is projected, and how much inflation.

Another cause of inflation for many countries is controlling gold provinces. If a country's gold income exceeds 40% of its monthly income, it will get so-called gold inflation.

There are other ways to get inflation. Some random events, such as the corruption event, can cause inflation. There are also particular scripted events for some countries which cause inflation, such as the bankruptcy event that Spain gets if it is successful in grabbing gold provinces in the New World. Also, bankruptcy causes inflation.

Reducing Inflation

Inflation is quite hard to get rid of. Early in the game the only way to reduce inflation is the "exceptional year" random event, which subtracts 2 points of inflation. But this is a random event. Getting one or two per century is about average; getting none in a century is quite common. Starting in 1600, "deflation" random events become active which can reduce inflation by 5 points, and then later even more random events (bank, stock exchange) may happen if you have infra tech 7 and, for "stock exchange", trade 9.

When you get to infrastructure 5, you can promote governors; each governor reduces inflation by 0.25 points per year, divided by the number of cities you own. Thus if you have promoted governors in every city you own, your inflation will decline 0.25 in a year in which you do not mint at all. Unfortunately, governors are not cheap.

A few major powers have scripted events which reduce inflation.

In summary, although inflation is not exactly forever, it is close. And thus, in general, you can think of inflation as "costing" you based by reducing not just your current cash balance, but also reducing all the income you are going to get for the entire rest of the game. That's why it's harsh.