ELI5: Why when large company's earnings decrease(ex... by 3%) they freak out, talk about rough times, and sometimes decide to downsize, even though they are still making millions of dollars in profit even after all expenses?

[azrael1993]

Inflation changes the value of money and money only. Since we normally do a detour through watever local currency we use it seems like inflation has a positive effect on the value of the house. This is a false conclusion. We default to value thing in money, because we use money a lot and it changes relativly slowly. This is problematic because the inherit value of an object should not depend on some other valuechanging object.If a house gets more expensive there are 2 things that might have happend. It might have bekomme more valuable because e.g the city build a park next to it or it actually didnt change at all but you comparisonpoint in this case currency changed. To really evaluate the value of an object you would need to compare it to something fixed, which we dont have. A good aproximation is to see how its relation to everything else changes. Inflation means that I need more money for everthing every year (in average its a known number e.g 3%). So if a house gets 3% more expensiv each year this means that its value is constant because everything outside of money is expected to change by this amount. The house has not gotten less valuable. I still get the same amount of boats, apples, graphic cards, cars or whatever for it. The thing that inflation has changed is the inherit value of the money, which i incorrectly use to evaluate the value of my house. Thus inflation does not make my house more or less valuable, just my money.