When markets were controlled by a relative few who had almost all the hard currency -- e.g. in the 1890s -- large-scale capital investment was impossible for up-and-comers. Thus Ma Bell, Standard Oil et al. couldn't be challenged by people with better ideas. The end result was a loss of efficiency in the system as a whole, until the government broke them up.

The loaf-of-bread issue is that economic output is not linear. Really, over time you get more and more output; more grain can be grown from one acre of land. Chicken costs 1/6th what it did at the start of the 20th century in real terms. Things get cheaper as we (as an industrial society) get better at producing them. And so it would make no sense if one chicken were permanently worth 0.1 oz of gold. You need to not just subdivide the gold further -- you need to create more gold, or more paper, or else people will not continue to make a growing number of chickens.

[ed] the above being the best explanation I can come up with after 6 beers, for how printing more paper or creating interest in a virtual currency is not necessarily inflation, but may just be keeping up with the rate of economic growth.