Inflation is the economic process that causes a generalized increase in the price of goods and services in a sustained manner over a period of time. The term “inflation” refers precisely to the fact that prices have risen or “inflated,” hence the name.
In other words, inflation occurs when the average price of all goods and services in a country rises.
Understanding what inflation is all about is very important, as it is a phenomenon that is currently occurring in a lot of countries. In fact, every country’s central bank always wants some inflation, usually between two and three percent.
As already mentioned, inflation is a phenomenon that occurs in the economy; therefore, it comes with a series of consequences that affect the economy. Among these consequences, the best known and most common is the loss of purchasing power in the population due to the generalized increase in the price of those goods and services that we acquire or use.
Purchasing Power
Because of the inflation process, salaries generally do not keep up with the increase in prices, and this is what leads to a decrease in purchasing power. In other words, we could be naïve and happy if our salary was increased by 10% every year, but if – at the same time – inflation is 20%, in reality, we will be able to buy 10% less with that salary. Put simple, inflation means that, with the same money we earned before, we will now be able to buy much less. So, at a certain point, we are being cheated by a salary increase that turns out to not actually be real.
In addition, inflation is regressive, meaning it affects the working sectors and those with fewer resources more than it does the wealthier sectors and those with more resources. This is the case because the sectors with fewer resources are those that use, on average, much more cash (or monetary balances) than the sectors with more resources. These sectors also have fewer financial instruments to protect themselves from inflation. On the contrary, the better-off sectors have access to more financial instruments (such as inflation-adjusted deposits), and thanks to these, they can protect themselves much better from the loss of purchasing power caused by inflation.
Historical Data
If we want to analyze the historical moment of what could be considered the origin of the inflation phenomenon, we must go back to 1933, when U.S. President Franklin D. Roosevelt cut the dollar’s ties with gold, thus allowing the government to inject money into the economy. In doing so, bankers gained a new tool that allowed them to start adjusting inflation according to their own convenience and economic interest. Using inflation, this economic sector can steal, in a much less obvious way, the money you have earned by working hard.
How is this possible?
What happens is the following:
Imagine that, with your hard work, today you earned $50 and now you can go to the store and buy food for the whole week. But six months later, due to inflation, you can only get a gallon of milk for $50. So, you can see that, through the phenomenon of inflation, you are being legally robbed of the purchasing power you had six months ago.
Looked at another way, imagine that, if the price of oranges is $2 dollars a pound, a person with $10 dollars can buy five pounds, but if the price rises to $2.50, he will only be able to buy four pounds.
These examples show that by using this tool of inflation, bankers are devaluing money to steal your goods, only by adjusting of the value of money through their computer screens. Meanwhile, you suffer as the hard-earned money from your everyday work becomes worthless.
In addition to the decrease in purchasing power, which is the most serious consequence for the population, inflation has a whole series of negative consequences for the economy that should be exposed.
Other consequences of inflation:
– Unrealistic and useless increases in wages
– Depreciation of the value of currency
– Increase in the competitiveness of currency
– Reduction in the real price of loans
– Increase in financing costs
– Benefit for debtors and detriment for creditors
Finally, after all this, what should resonate in our thoughts is that, for many years now, bankers have been using inflation as a weapon to take away our economic wealth in a camouflaged way and keep us working for longer periods of time.
The Present Moment
Were you happy about receiving stimulus checks during the pandemic 2020/21 crisis? Well, if the answer is yes, you were cheering those bankers while they were robbing you in plain sight! They printed so much money that they even stopped reporting how much, which means they have stolen yet more purchasing power from your hard-earned dollar. This situation is, unfortunately, not a joke. You can see this happening if you watch the stock market. Prices are going up and companies are producing less. Why? Because the value of the stock is going down, and at the same time, the dollar has become so far devalued that you need to spend more these devalued dollars to purchase stock in a company that is producing less.
Do you see the point?
