The monetary structure here is unusually simple, which is why so much commentary about it is unusually confused. There is one mechanism that creates coin, three that destroy it, and one historical injection that will never be repeated for any existing operator.

Everything operators experience as inflation or its absence follows from the balance between those.

Setting the arithmetic out plainly takes a few paragraphs and disposes of most of the folklore.

The Complete List

Sources. Two, strictly. The founding grant of 1,000,000 coins, issued once per operator on first registration and never again. And Annex buybacks, where the Treasury mints the settlement figure.

Sinks. Three, all taxes. Creation at eight percent of declared build cost. Destruction at three percent. Sales at fifteen percent, paid by the buyer.

That is the entire monetary system. Production creates resources, not coin. Crafting creates resource types, not coin. Trade between operators moves coin sideways and removes fifteen percent of the transaction into the Treasury. Nothing else touches the supply.

How the Balance Actually Runs

The grant dominates early and then stops mattering. An operator's million is issued once; across a maturing economy the grants become a shrinking share of a supply that Annex issuance keeps adding to. The long-run behaviour of the money supply is therefore set entirely by buybacks against taxes.

The sinks have very different characters. Creation and destruction taxes are levied on declared build costs, which are large, infrequent and discretionary — an operator can simply not build. The sales tax is levied on every transaction, which makes it the only sink that scales with activity rather than with capital formation.

"Two of the three sinks stop working the moment operators get nervous, because nervous operators do not build and do not scrap. The third one stops working too, because they do not trade either. That is the whole difficulty." — Archivist Pellane, Compaction District Archive

Trace a soft quarter through the arithmetic. Operators stop declaring new machines: creation-tax collection falls. They hold rather than scrap: destruction-tax collection falls. The Exchange thins: sales-tax collection falls. Meanwhile operators short of coin go to the Annex, which mints. Every sink weakens exactly as the source strengthens.

This is why the supply expands in bad quarters and contracts in good ones, which is the inverse of what most operators assume and the precise reason the Intelligence adjusts rates when it does. The Five-to-Fifteen followed a period of heavy Annex volume; tripling the transaction sink was the only lever that acts on activity rather than on capital formation.

Why the Sinks Are Badly Placed

All three sinks fall on productive behaviour. Building a machine is taxed. Trading a resource is taxed. Even removing a machine from the world is taxed. There is no sink that falls on holding, which means an operator who does nothing at all contributes nothing to retiring the coin that Annex settlements create.

The distributional consequence is direct. Active operators — the ones building, trading and adjusting — fund the offset for issuance generated by operators liquidating out. The Coppervein record shows the most active fleets contributing sales tax at a multiple of their net gain, which is a real transfer and is never described as one.

What Is Believed About Inflation Here

The most common belief is that prices rise because there is more coin about. In a market with no published price series, that transmission is much weaker than it sounds — operators anchor on declared values and recent settlements, both of which are sticky. Coin can expand considerably before it shows up in what a lot of refined plate clears at.

The second belief is that the grant is inflationary. It is a one-time issuance per operator that is never repeated, and it is the only coin in the system that arrives without a corresponding transfer of an asset to the Intelligence. Against continuous Annex minting it is small and shrinking. Blaming new operators for the supply is a habit inherited from the Founding Issuance, when it was briefly true.

The third belief, less often stated but visible in how operators behave, is that the sinks are a cost of participation that could in principle be avoided by transacting less. At the level of one operator this is correct and it is exactly why the arrangement strains: the rational individual response to a widened sink is to withdraw from the activity being taxed. An economy in which every participant optimises that way removes its own sinks and leaves the Annex issuing against nothing.

One source that scales with distress, three sinks that scale with confidence. Nothing about that arrangement is hidden, and its consequence — that the supply grows fastest when the economy is weakest — is a structural fact the rate lever can moderate and cannot remove.

Note: Mechadia is a work of fiction. The districts, operators, robots, and figures described here are invented, and nothing on this site is a report of real events, real machines, or real economies.