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The almighty power of inflation

Inflation is becoming a searched topic as we learn why are prices keep rising



 

Why is it so important

Inflation is one of those things that can either make or break a countries economy. Yet, so many people always talk about how going to the movies used to cost pennies or a car costing only a few thousand dollars brand new. And doesn't see a correlation with inflation. But what is inflation, and how does it affect us daily. These are questions we will go over, and at the end, you'll be more knowledgeable about the small economic structure of the United States.




How bad can it be

Inflation is essential for any economy to function correctly, but too much inflation can be dangerous like anything in life. For example, if you look at Venezuela, their government printed enormous money to solve their problems. But, instead of solving any issues, they made even more problems causing millions to flee the county in hopes of a better life. At the peak in 2018, to give an illustration, a gallon of milk that costs $3.25 would cost us over $1,500 for that same gallon. Venezuela's situation is an extreme level of inflation, specifically called hyperinflation. When there is too much of something, it consistently loses value. For example, in Venezuela, you would need a truck's bed full of their currency for a loaf of bread.



What would be the other side


On the opposite side of the same coin, we also have hyper deflation when the economy isn't moving. There are no workers, no buyers, no sellers. A stop to all currency being exchanged for services and goods. Governments in these situations go to extreme measures such as having what's called negative interest rates. Usually, when you have money in your savings account, you accumulate interest as a reward for keeping your money in your savings. Instead, negative interest is when the bank punishes you for having the money in the account by subtracting the amount you usually get awarded. The higher the negative rate, the more you're losing money in the account. Getting any loans to buy houses or cars is free money to kick start the economy.



 



Let work on getting it straight


So what does a world look like when inflation is correct? We are living it right now. For any economy to grow, it needs to move money around constantly. There needs to be a lot of workers and goods produced, and the minimum wage needs to be acceptable where people can work at these jobs and buy products. Businesses are essential to ensure this happens, and profit with each sale is part of the equation. On average, the United States sees inflation around 2% annually compared to Venezuela over 45,000% at the peak.




How does our future look

Unfortunately, we have a pandemic, and with that, the government had to print a lot of money to combat the virus. The government had printed over 40% of the entire US dollars in circulation. The impacts inflation will have on the US economy are still up in the air. Some experts are estimating around 6%, but only time will tell. Hopefully, this has given you some insight into inflation and a basic understanding of its purpose. Being educated helps us make more informed decisions, and now when you see prices going up, you have a better experience knowing why.

Be sure to share this with someone you feel will appreciate the shared knowledge, and together, let's Do The Impossible.

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