Chapter Thirteen
The Big Scary Thing: Inflation
There is a small but dedicated group of DMs who, whether out of a particular interest in the financial aspect of D&D, a desire promote maximum realism, or something else, are interested in knowing how to include a reasonable measure of inflation in their games. I respect this devotion to verisimilitude greatly, and if it’s not clear by this point, I enjoy delving into the economics of the system enough to find those people the tools they need.
After a fair deal of study and due consideration, I have developed the best advice I can for including inflation in your games.
Don’t.
I understand the desire. If you have even a basic concept of inflation, it makes sense that hauling an ancient dragon hoard back to town might have a substantial impact on the local economy. And a good portion of the reason not to include inflation has more to do with game design than the economics of the matter.
Let’s talk about inflation itself first.
Inflation: Not Actually the Big Scary Thing
The general understanding of inflation works like this: There’s a certain amount of money that flows through an economy, and prices for goods and services based on what people are willing to pay based on how much of that money they earn or possess. If you add to that amount of money, demand increases since people can pay for goods and services more easily. The prices for those goods and services then rise in response, otherwise the supply won’t be able to meet the demand.
If a huge amount of money is dumped into the economy at once or in a short span of time, prices spike, with generally detrimental effects. At first, only the people who get their hands on that new money can afford things. If inflation spirals out of control, money in general becomes useless.
There have been famous instances of this in real world history, most famously the hyperinflation in Germany between World War I and World War II. Briefly: the German government printed extra money to pay debts, mainly war reparations, and support the worker’s strike against French occupation. They printed so much money, however, that the German mark became effectively worthless. People had to push wheelbarrows of money to stores in order to buy anything. A 21st century instance of hyperinflation occurred when Zimbabwe had to pay for a war and deal with droughts and the effects of a policy of confiscating farmland from its previous owners. You can currently find various denominations of Zimbabwean banknotes on eBay, up to a hundred trillion dollars, because they’re little more than collector’s items now.
Sometimes when people contemplate what inflation in D&D would look like, this is what they think about—vast amounts of money dumped into the system and prices spiraling out of control. However, it’s extremely important to realize that every instance of hyperinflation in world history happened when the government in question made use of fiat currency (money that’s worth something because we say it is); more importantly, it’s happened when the government at fault used paper money and could print it at will. It has never happened with a coin-based economy. If enough coins are introduced into the system to devalue the currency and raise prices, the system will find a new equilibrium. Even if everyone in a small village is handed money equal to one hundred times what they already have, and the village is a closed economy where no one can move the money out or come steal it, all that will happen is that everything will cost one hundred times what it currently does. Prices won’t continue to spiral until the coins are genuinely worthless.
That said, I think most people who consider inflation in their D&D games think of it in terms of noticeable, but not absurd, price increases caused by large sums of wealth being dumped into an area. That’s all well and good, and you can make rough estimates of how much extra money creates how much inflation, but from a game design perspective, it’s really not worth the effort to replicate inflation unless the effect is substantial. And what it would require to create a substantial impact is almost impossible for a party to achieve, at least on accident. They would almost have to make a concerted effort to throw a local economy on its head.
To understand why, we have to discuss...
The Nature of Inflation
As mentioned, the general understanding of inflation is that when money is added to the economy, prices go up. When thinking about inflation in D&D, the first thing we need to figure out is, exactly how much money is being added to the economy? In other words, how much extra money is being put into the hands of people who will spend it on something else and put it into regular circulation?
This is a much different question than that of how much the characters have. A tier 4 group, the ones who are most likely to come home with that massive dragon hoard, average around 336,000 gp per mission, going by the income table earlier in the book. That’s a substantial sum. But the amount they take out of the dragon’s lair doesn’t matter. If they take 336,000 gp out, and put every coin into a vault in their ultra-secure stronghold, there’s no inflation because they haven’t put any of that money into circulation. Easy enough.
Of course, what’s far more likely is that the group spends some portion of the money. Generally speaking, even with magic items for sale, they’re not going to spend all of it unless there’s a major purchase they were already planning to make as a group with the proceeds. For the sake of argument, though, let’s say they spend every coin of that 336,000 gp. That has to create some kind of inflation, right?
Well… not necessarily. Let’s go one step up the path on which this money is traveling. First of all, what is a group of that level buying with that kind of money? Between the PHB, DMG, and this book, the main options are really castles and magic items. They might also fund an army or have some other campaign-specific reason to spend that massive amount of cash. So, what happens to that money?
Buy a magic item: Depends on the seller(s). If it’s a business, presumably they use the funds to support the business. The proprietors might use a portion of it to celebrate a major sale, but only that portion would be considered truly additional money thrown into the economy (assuming they spend it locally and not paying some extra-planar power to throw the greatest party of all time). A private seller allows for more possibilities, but what they spend mainly depends on the reason for selling the item in the first place.
Build a castle: The money for a castle, keep, or any other major structure goes towards materials that take time to collect, and labor that is paid bit by bit as the work proceeds. Even if the party sets the full amount of money aside immediately, most of it will be spent over time, so the immediate impact may not be very large.
Hire an army: If the party throws a bunch of money up front at soldiers, then keeps them in one place (after they’re considered trained), the local bartenders, brothels, and gambling halls will probably raise their prices. It might be interesting to have the PCs hear their soldiers grouse about getting ripped off. More serious effects could occur if the PCs pay more than the normal wage for soldiers, or if the pay of the soldiers located in the area is substantially higher than the overall wages made by everyone else. However, if their army is on the march, this effect ends up moving from community to community, thus mitigating the effect in any one place.
You get the idea. Even when the PCs spend a ton of money, it doesn't necessarily circulate in a way that will create serious inflation.
Ok, but why couldn't a smaller amount of money create inflation?
The flat amount of money that enters the economy isn't what creates inflation. It's the amount of new money relative to how much was already there.
Now's a good time to discuss the game design aspect, namely:
Making Inflation Fun
This sounds, immediately, like an impossible task. Inflation isn’t merely related to economics, which plenty of people think is the antithesis of fun; it’s generally perceived as a wholly negative aspect of economics (somewhat unfairly, but also with some cause).
So, let’s not think about inflation. Let’s think about why games are fun, and more specifically why D&D is fun. People get joy out of numerous aspects of D&D—fighting, playing politics, solving puzzles, even shopping. One thing all of that has in common is that the PCs are affecting the setting around them. The players, through their decisions, are making changes in the world their characters inhabit.
It is absolutely possible to make inflation one of those things. In fact, one of the odd joys of DMing is introducing players to the unintended side effects of the things their characters do, and watching prices jump because of their wanton spending habits will almost certainly take them by surprise. Of course, if the change is too small or if there are a lot of other things going on, those new prices can go basically unnoticed and either be a waste of your time as the DM or annoying to the players that they have to keep track of some other minor details.
The first rule to making it fun is this: Don’t nickel and dime your players. Most things are so cheap to the PCs, especially once they’re hauling in enough money to even begin having an inflationary impact, that they may not notice the price of a room at their favorite fancy inn went from 5 gp to 6 gp. If that’s what happens, there’s no point. If they do notice, it may be worse—these price increases mean nothing to them, so why are you bothering to put them in the game?
Let’s discuss three ways to potentially introduce inflation into the game, and when (or if) you should use them.
General inflation. This is what people usually think of when inflation comes to mind—prices rising across the board. PCs can throw off a village economy this way by throwing several hundred gold at people; that could boost prices by 10%, maybe 20%.But what’s the point? A village isn’t likely to have much the PCs can’t afford just as easily at 20% above the normal price. It doesn’t look like a major effect—an ale is 5 cp instead of 4, a room at the inn is 1 gp, 2 sp instead of just one gold piece, and so on. It doesn’t particularly impact the characters, it’s an inconvenience to most of the villagers but not enough to start a riot, and in general it’s hard to make that worth noticing. Plus, that extra money can very easily end up leaving the village through trade unless the village is particularly remote, so it’s a small effect that’s likely to take care of itself.
Here’s the suggestion: Don’t include any type of general inflation unless the PCs put an amount of gold into the settlement at least equal to the baseline amount used when determining a settlement’s wealth. At that point, if the money has been fairly well spread across the population, you can reasonably say that inflation has struck and doubled the prices of all goods, or all everyday goods (excluding big-ticket items like expensive armor).
But Waterdeep’s baseline is 500 million gold!
Yep, and no party will ever create real inflation in Waterdeep short of a concerted effort to bring in cash from across the multiverse and screw things up. In fact, permanent general inflation is unlikely to be something you’ll ever need to use. Sure, a village of 750 people only has a baseline of 3,000 gp. But what party is dumping 3,000 gp into that village? Let’s say, for the sake of argument, that a village has an armorsmith who sells plate mail—most wouldn’t—and the party buys two sets. By this guideline, you could say hey, they hit the baseline, time for inflation. But even then, does inflation make sense? After all, they put that money into one person’s hands, which means it’s up to that person to put a big enough chunk of it into circulation to create inflation.
Since creating a set of plate requires 750 gp in resources, he has to save at least half of that on materials to replace the ones he just used. That almost certainly requires him to give that money on a trader from outside the village.
If he’s smart with his money, he’ll probably save a good deal of the rest, as these kinds of purchases probably don’t happen often. Even if he’s not, there won’t likely be much in the village on which he can spend that 1,500 gp profit. And any large chunks of cash he does spend will probably go to other businesses, who need to replace whatever he bought, which means more money going to traders outside the community.
You’ll probably find this to be the case no matter what type of settlement you look at. Larger or wealthier ones will have too much money for a party to realistically dump an inflation-causing amount of cash into the system; a smaller or more squalid place won’t have anywhere for them to spend the necessary money. It’s possible to create this effect in an isolated area where everyone finds their own resources and trade is almost entirely within the settlement; places that deal with caravans that are going to take some of their newfound wealth away will be very unlikely to suffer from more than temporary inflation unless the broader trade network is dealing with inflation as well.
The main example of a real-world civilization that suffered real deleterious effects from inflation while still using precious metal coins is the Spanish Empire of the 16th century. Once they found silver in South America, they imported enough of it that it began to lose value and it took more to buy anything on the open market. But even in that case—and they imported a lot of silver—it took decades for the impact to be felt. It’s simply too difficult for a single adventuring party to dump enough money into a town to throw off its economy permanently unless they’re drastically overpaying for services or just handing it out because they feel like it.
Item-specific inflation. This is more plausible, and it has more potential as a storytelling vehicle. It takes a lot of money to create general inflation in an area, but to raise the price of a particular good or service, one need only buy enough of it to limit the supply left over for everyone else. It can impact any level of the economy, from the local to the worldwide.
As a local example, take the village armorsmith from the last section. You have a dwarf who decided to move to a remote human village of around five hundred people. He has a suit of plate mail as part of his stock, and refurbished a second that some adventurers brought in as scrap. The party buys both. The dwarf, in turn, goes to the local innkeeper and offers to buy every barrel of the ultra-popular dwarven ale at a premium, so he never has to go out for a drink (he’s very introverted). The innkeeper, sensing an opportunity, offers to sell every barrel but one. The dwarf agrees and buys seven barrels for 100 gp. No big deal; he can afford it. The trade cart from the dwarven settlement that sells the innkeeper the ale won’t be back for weeks. Since the innkeeper only has one barrel left, he raises the price of a mug from 1 sp to 3 sp. If anyone complains, he says he’s low on stock and they’re welcome to buy something else or go pick up the next shipment themselves.
Does this affect the party? Not materially. Not only will most parties not bat an eye at good ale costing 3 sp instead of 1 sp, many adventurers throw extra money at innkeepers anyway to gather specific information or stay generally informed. But this change in the village’s function can lead to a few potential outcomes.
The town drunk accosts the party and blames them for the price of his favorite ale being priced out of his range.
The town drunk blames the dwarf for buying all the ale and raising the price.
The town drunk blames the innkeeper for being a greedy shit.
A thief at the inn hears about the dwarf buying all the ale, and assumes (correctly, in this case) that the dwarf must have an awful lot of extra cash on hand.
None of these are major issues, and of course you can skip all of this. But if you want a minor encounter for the group to play with, this can be a good basis.
On a broader scale, consider materials that are critical in a D&D society. Coal, for example, is a common heating source, especially in forges. Similarly, iron is needed for steel, and steel itself is obviously valuable. Expensive ingredients for magic spells, such as diamonds for raising the dead, are also something which might be widely desired. A person, kingdom, or other entity could wield an enormous amount of power by purchasing a huge proportion of these, or other highly-sought materials; likewise, prices could rise quite a bit naturally if there was a general upsurge in demand.
When dealing with this scale, working across continental or even worldwide markets, major politics come into play. If numerous competing players are buying the same material (e.g. nations are gearing up for war and everyone is looking for sources of steel beyond what they can make themselves), a city or nation that the players work for or are allied with may look to them for help. This could mean traveling to a location that sells large quantities of steel and negotiating exclusive rights (high-stakes diplomacy is right in some players’ wheelhouses), or perhaps protecting the same area from an encroaching enemy army that would rather take them over than negotiate the best deal. You could even have a de facto war between huge merchant guilds, where the side the PCs choose will end up with a major trade advantage over its rivals.
Alternately, the evil nation of Terribleguys might be sick of having its assassinations foiled by the good people of Wonderfulplace because their clerics always have the diamonds on hand to raise the dead. Death can’t always be avoided, but Wonderfulplace has mastered the art of preventing the obliteration of bodies or letting them be carried away until Raise Dead can no longer be used. They also have a special task force which handles, among other things, the retrieval of bodies or body parts that would allow a Resurrection to be cast. It’s hard to solve that problem with assassinations so brutal and complete that raising the dead isn’t a realistic option.
Instead, Terribleguys piles a huge amount of resources into buying out all three major diamond mines on the continent. Terribleguys could then put more resources into protecting them so they can sell the diamonds at a premium. Wonderfulplace might be able to acquire them via a third party, but at another markup. If they want to ensure Wonderfulplace can’t get the diamonds through any means, Terribleguys might keep all the diamonds for themselves (evil people can want to raise the dead or make very nice jewelry), or even dynamite the mines if they’re about to lose control so no one can use them without an unfathomable amount of effort. Either way, the only diamond mines left are on the other side of the world. If Terribleguys holds the mines, the party may be hired to free them. If Terribleguys dynamites the mines, perhaps instead the party is hired to adventure to the other side of the world and set up a teleportation scheme with the mine owners. Until the problem is solved, however, diamonds are five times the cost, and if Terribleguys makes a point of chasing after high-ranking members of Wonderfulplace’s society, Wonderfulplace will eventually run out of diamonds and not be able to afford more.
One obvious change that has nothing to do with inflation or prices or money at all is to have Terribleguys take charge of all the diamond production and Wonderfulplace just can’t get diamonds. It’s more straightforward, and would generally be easier to use as a plot point. If you use the inflated price angle, then the problem becomes more of a slow burn, which gives the party a chance to a) accomplish other things as they’re chasing this potentially world-exploring goal, and b) gives them time to develop more options. Adventurers generally have to find a way to fix a problem immediately, and this can give your players a chance to stretch their creativity.
All in all, targeted inflation is more of a possibility to keep in mind for why NPCs might act a certain way or ask the PCs for help than it is anything the PCs will deal with directly. It’s a very plausible thing to have occur—it’s happened since the beginning of trade, anytime people have a greater desire or need for a thing than they did before—and being aware of it opens up the options you have as a DM.
It’s highly unlikely the PCs will have this effect anywhere in the campaign unless they try to make it happen. If you want to make this type of inflation impact the PCs in a way that brings them into an adventure or an investigation naturally (ie. without being specifically hired to do so), make it affect something they need, like expensive spell components.
Temporary inflation. This is exactly what it says—temporary. The army spending a few days or a week in a town is a classic example. It’s combined with either targeted inflation (e.g. only the soldiers are looking to spend their pay, so entertainment options suddenly become more expensive), or more general inflation (e.g. the army commander restocks in town but insists on paying for everything rather than raiding their stores, so there’s a lot more money and a lot fewer resources to buy). Since temporary inflation is also either widespread or targeted, it doesn’t require rehashing how the prices go up. All you need to remember is that you can consider it temporary if the state of affairs causing prices to go up has a clear endpoint. If the army’s near a town, prices may stay high for a short while after they leave, but once the people with all the extra money are gone, the citizens with their normal amount of money won’t be able to pay the same rates and prices will have to return to normal levels. The people who made out while the army was there, especially if it was only entertainment options that were able to raise prices (tavern owners, brothels, gambling halls), will simply be doing better with the extra money in their pockets.
All of this is here for you to use if you think it can enhance your game. However, as mentioned, inflation is a difficult thing to create in an economy based on rare metal coinage. As a modern society with a modern economy, we tend to think of inflation as a natural outcome of economic activity, but that’s because we’ve learned to use paper money effectively, which includes maintaining a small amount of inflation. In an economy where commerce is based on trading precious metal coins, that’s simply not much of a concern.
There is one potential issue, though.
What happens when a large number of those coins disappear?
Deflation: The Actual Big Scary Thing
The simplest definition of deflation is this: prices dropping due to lack of demand. At a glance, some people think, “Yay, lower prices,” but this is a huge issue for an economy. When inflation occurs, it at least can spur economic activity because the money people have is more valuable spent on goods than kept under their mattress. However, if prices start falling, money actually becomes more valuable the longer it’s held. That leads people to not spend it, and if they’re not spending what they have, then demand falls further, leading to more price declines and a potentially serious snowball effect. If nobody spends what money they have, business dries up, shops close, people are unemployed, so they have no money, more business dries up, and so on.
Unlike the different ways PCs might see prices inflate, general deflation is the only thing worth noting here. “Targeted” deflation happens all the time—for example, horse and buggy prices dropped pretty fast once cars became a thing. That’s not really, deflation, though, it’s just a change in demand. Also, because deflation is so economically damaging, governments need to do whatever they can to make it as temporary as possible.
The reason we don’t really think about deflation in the modern world is the same reason we always consider inflation to be the economic price problem: even if you set a billion dollars in paper money on fire, more can simply be printed to replace it. (There are ways deflation can occur when using paper money, but the economists in charge of fiat currency have some very powerful tools available to fight it.) If a hundred thousand pieces of gold sink with a merchant ship, however, that money is simply gone, and the economic power it would have provided sinks with it. And that’s why, if you want an economy-based source of drama and stress for the citizens of a D&D world, deflation is a richer vein of material than inflation.
First off, it’s more dire. “Bandits came in and robbed half the families in the village last week” explains why the tavern is empty and why the general store owner is panicking—there’s no money to pay the caravan scheduled to arrive in five days.
Second, it’s easier to relate to a lot of the reasons a settlement might be overall low on cash. If bandits and robbers seems too easy, the story of, “The mayor got scammed and spent half the town’s money on a bullshit investment, and now he can’t pay the town’s workers” is immediately understandable. It also leads directly to, “Well, we better find these scammers and get their money back, in exchange for our fair cut.”
Third, it’s easier for PCs (and players) to grasp the reasons for deflation than inflation, even though the players are almost certainly more used to inflation as an economic term.
Inflation: “A lot of money was spent in this place, so now the place has a ton of money, and prices have gone up because everyone has so much money they can afford to pay higher prices.” Or, “A bunch of people bought a whole lot of this particular thing, so now what’s left of the supply of that thing is more expensive because a whole lot more people want it and the people selling it have control of the market.”
Deflation: “There ain’t enough money here!”
From a game design perspective, one general upside to deflation is that factors which create deflation are often good adventure hooks on their own. If a village gets robbed of most of their coin, or if a dragon is extorting payments in exchange for not melting them all in a gigantic spray of acid, a band of heroic adventurers don’t need to know the deflationary impact of losing that cash to be convinced it’s worth taking up arms to help the people.
But that begs the question, why bother with figuring out how deflation would look in the settlement or society the PCs are dealing with if you can ignore all that and still have a perfectly good adventure hook? And, the truth is, you’re often not going to need anything specific about deflation effects. Again, from a game design perspective, this is broadly good—you have enough on your plate as a DM, so the more you can get out of a minimum setup, the better it is for your campaign.
Some people like these complex dives into the systems of the world, though—if you’re reading this, there’s a well above average chance you’re one of them. So, let’s go through a few scenarios and discuss how, or if, the actual effects or potential effects of deflation are something with which the PCs will interact.
A roadside village with regular trade, robbed by bandits: As mentioned, the drama of the robbery is a good hook. However, the effects of deflation are felt over time. If the village has regular trade, that means they produce something of value. Even if those items of value are stolen along with the town’s money, the village can presumably produce more. Once they produce more, they have something to sell again, and their economy comes back into balance. If the bandits visit again, that’s obviously a major problem. Again, however, that’s a hook which doesn’t require anything about deflation to be interesting.
One idea more related to the economics is if the method by which the village partakes in trade is also stolen. For example, the party comes across a mining village where the miners are lingering about, living off the charity of the farmers, while the mayor tries desperately to conceive of a plan that will get the bandits away from their mine. They can stay fed, but the farmers are getting sick of being the ones working, the miners are tired of having no money and nothing to do, and the town’s ability to import the rest of its needs (which it used the mine’s proceeds to do) has mostly evaporated. Even the guard runs on a minimum rotation, despite the bandit presence, because there’s so little money to pay them.
If this state of affairs doesn’t change, the miners will leave to find work elsewhere. When they go, the village’s capacity for supporting itself will vanish, as there isn’t enough traffic for the village to survive on trade alone. The farmers might be able to make it as an isolated hamlet with little of note besides an inn, but they would be running on the hope that no one bothers to attack and take their stuff. Given that the problems started with bandits robbing the town, they might all decide its in their best interests to leave.
The party could stumble across this type of situation, or it might be a job advertised by caravans who don’t want to lose the village as a trading partner, and who point interested parties towards the mayor if they’re looking for work.
The noble in charge of a border town begins taxing her citizens out the nose. The basis is a claim that political connections have warned the neighboring nation is gearing up for a potential conflict, and the town’s defenses need a boost. This has been going on for the better part of a year, however, and now the people have so little money that items mainly purchased by the town’s citizens (basically everything low-cost in the PHB) sell for about half the normal price because the merchants can’t get anything more for them. Caravans still expect their normal wholesale price, however, so the merchants are struggling right alongside the highly-taxed citizens. They’ve also stopped carrying any goods deemed non-essential, because no one buys them even at a cut rate. (The town blacksmith probably still has some weapons and armor; citizens need those less often than travelers and the town guard, so those don’t need to drop in price.)
It’s very important, in a situation like this, to impress upon the party how much the town is struggling so they understand there’s a cost to the low prices they’re able to pay for goods. If the townsfolk think there’s any chance the party will help investigate whether the noble is screwing them over (one claim is that funds need to be saved to potentially hire a mercenary army, which is why it hasn’t been actively spent on the town), they’ll send a representative to talk to the group. A deflated economy is fertile ground for desperation, and the townsfolk might make grander promises of rewards than they can keep in order to secure the party’s help.
It probably goes without saying that this is a situation you might want to give to a good-aligned party with a penchant for helping the helpless. Giving it to a selfish, greedy party is only a good idea if you want to watch them abuse your NPCs, because this is a perfect opportunity for them to do so.
A small but culturally important city. A city once on the verge of growing into international importance but now with a fading star. A large, metropolitan center of commerce. Or any true city at all. If a place this size is sapped of so many resources that it could enter a period of true deflation, it’s probably due to one thing: war.
The town in the example above is thrown into disarray by excessive taxes for “wartime preparation”, because war is the rationale least likely to earn backlash from the population. It’s difficult (though not impossible) for a city to be taxed at a level that would create real deflation without the people rioting unless it’s to support a war. (If the people are more angry about the taxes than they are fearful of a lost war, they may riot anyway, especially if the war is dragging on.)
If there is a war, however, and a city involved has spent so many of its resources that its economy is deflating, that’s a massive warning sign. The city, or nation, may soon struggle to pay its forces, if it’s not already. The general mood of the city will depend on how well its leaders are selling their positive propaganda, but there will certainly be at least pockets of discontent among the people. Should their forces be unable to win the war soon, they may have to sue for peace on financial grounds.
This is a prime opportunity for a band of capable mercenaries to turn the tide of a conflict for a quality payday… or perhaps a promised payday once the city recovers its strength.
Alternately, the war may be over. In that case, there’s a good chance a city in this state of affairs has lost. That’s not a given, though; a war can devastate the loser and still soak massive resources from the winner. Either way, the problems can create a certain level of chaos in the streets and the surrounding areas where adventurers might come in handy.
It should be noted that not only is it difficult for a city to fall into deflation, the economic strength of a healthy city is such that its outlying villages or towns are much less prone to a deflationary spiral, even in the face of disaster. The city government (or national, in some cases) can directly put resources back into the settlement to keep it running. Even if they don’t, continuous trade with farming hamlets, other villages, and perhaps the city itself will push the settlement back into equilibrium given time. If shop owners and others who help supply the town can’t recover, the city will almost certainly have people ready to buy the struggling businesses and inject new money into the area, helping it recover. Those people may be terrible vultures ready to gorge themselves on a weakened populace, but their gold counts the same as anyone else’s.
A tyrant heavily taxes their citizens to build a glorious statue in their likeness (or to fund any other non-war personal project). This is the act of someone at the top of the hierarchy, usually a king, emperor, or equivalent. A noble in charge of a remote town could do something similar, but if they’re technically subject to the laws of a larger principality, the next person up the chain might look askance at such behavior. In any case, if the people aren’t rioting, it’s probably because the peace is kept by a very well-paid and loyal force of guards or soldiers who quell dissent and don’t ask questions. This is a classic scenario for adventurers to intervene in (or not), but playing out the effects of the people having no money can add a great deal to the scenario.
A note on natural disasters: It may seem as though earthquakes, floods, etc., would have a similar effect to a war. They may not wipe out resources in the same way, but they’re still highly destructive. And, of course, natural disasters can create lots of potential for adventure hooks.
However, they don’t generally have this type of specific economic effect. Sure, lots of spendable resources can be carried off by floodwaters or blown away by hurricane winds, but natural disasters are destructive towards buildings, infrastructure, and other major sources of wealth. A farmer who loses five, ten, or even fifty gold to bandits is rarely as bad off as one who no longer has a house. If it’s possible to recover from such a disaster, that doesn’t mean there will be deflation; their spending priorities may need to change, but if they haven’t lost any actual money, then the amount of economic activity possible is the same. In addition, people have a tendency to band together to rebuild and are more inclined to be charitable, especially when they may need the charity just as much, taking some of the strain off their resources. And if the damage is too much to recover from, the residents may abandon the area, which also has little to do with deflation.
War, on the other hand, is a catastrophe for spendable resources (e.g. coins and gems). If a town or city is directly attacked, the people may work to rebuild just as if they faced a natural disaster, but if money is drained to pay for the army and there’s no local fighting, the problems you’re going to see are economic.