Well, they didn't. For a while, and even yet today, we have enough resources we can act like they are infinite. We can solve this problem by looking at post-industrialization; services can take the place of resources (to a certain, but effective) effect. Plus, economists don't know super well what they're doing, they are still playing around with models (and actual economies) trying to find something that will work. Ideal inflation is nowhere near as extreme as your example. The Fed's target rate for the US is just 2%. So I might be left with 98% of a house. Assuming we somehow even got to that. In general, low inflation seems to be the best way to keep the economy stable, though obviously it doesn't always work. Under perfectly ideal conditions, wages will increase with inflation, so the buying power of wages remains the same. In practice, this hasn't happened, and fixing it would be complicated, but the ideal would avoid any situation at all similar to the house example.
Here's a far more fundamental thing I'll ask instead: why should it be fair? What makes fair a desirable goal? Even further, how far should fair go? If we are going to try to build a better economy, we cannot rely on just emotive respondses and "not buying" things. A better (or even ideal) economy would need to be based on solid rationale and build from the very foundations of society.