In this article, we’ll explore:
– What the inflation rate is
– How it can be measured
– How changes in the inflation rate affect consumers and the economy
– Some of the major causes of inflation (hint: there are more than you think)
What Is Inflation? Inflation is an economic term that refers to a rise in prices. The cost of goods and services increases over time, which has an effect on the purchasing power of consumers. Your dollar doesn’t stretch as far today as it would have five years ago, or even one year ago. This is because the cost of living has risen. You can buy less with your money today than you could yesterday. Because of this, consumers must take home higher paychecks to maintain their standards of living.
If you’re reading this blog on How to Survive Inflation and Hyperinflation, then you’re probably already aware that we are experiencing a period of rising prices. By some estimates, we are currently experiencing the highest rate of inflation since 2009 during the Great Recession. In fact, this current round of rising prices is one of the biggest factors driving up consumer interest in cryptocurrency investing. Before we get into what cryptocurrencies have to do
The problem with inflation is that most people don’t really know what it is or how it works. This leads to a lot of inflation myths and ultimately, bad financial decisions. So I thought I’d write about inflation and bust some of the common myths about it.
Inflation is not rising prices. If you look at a chart of the consumer price index (CPI) over the past 30 years, you’ll see that while prices have risen, they haven’t risen consistently. Sometimes prices go up, sometimes they go down; sometimes they rise faster and sometimes slower.
Inflation isn’t even rising average prices; it’s rising average prices over several years. That might seem like a nitpicky definition, but it matters for two reasons:
First, it helps us understand why inflation happens in the first place. It doesn’t just happen randomly; it takes an increase in money supply to cause inflation. Think about it this way: if your income increases 2% per year but all the prices you pay also increase 2% per year, then your real income hasn’t changed at all! In fact, if your income rises 2% per year while average prices rise only 1%
Inflation is often referred to as the silent tax. Most people know the basics of how it works, but few realize what it can do to their finances. There are many different factors that contribute to inflation. As an investor, you should be aware of how each of these factors can affect your portfolio.
The most common factor that causes inflation is the rising price of goods and services over time. When inflation occurs, consumers will pay more for the same amount of goods and services. This is known as “deflation.” The effect that it has on the economy can cause prices to go up or down depending on the amount of inflation that occurs. The rate at which prices rise is known as “inflationary pressure.”
Inflationary pressures can also be caused by other factors such as demand for a product or service or supply and demand of a currency in terms of another currency. It can also be caused by shortages or surpluses in a certain market or industry. In this article, we will cover some of the basics of inflation and its impact on your finances.
The economic explanation of inflation is simple: it’s the result of too much money chasing too few goods. If the government prints too much cash, there will be too much money in circulation relative to the amount of goods for sale, and that means that more money is chasing each good. That puts upward pressure on prices.
So far, so good. But why does this happen? The supply of Bitcoin is limited to 21 million coins, so surely no one can just decide to print more Bitcoin? And yet we see that its price has been going up and down like a yo-yo of late. Is this some sort of economic alchemy where gold turns into Bitcoin?
Not at all. Inflation isn’t magic: it’s the result of an increase in the supply of money relative to an economy’s ability to produce goods and services. But when we’re talking about cryptocurrencies, we are not talking about a traditional economy with a central bank that prints paper currency. We’re talking about a very different kind of system, one where instead of printing currency a central bank or government decides how much money to put into circulation by adjusting the interest rate.
It sounds crazy, but it’s not as crazy as you might think! There is no real “money” in the
Inflation is often viewed as a necessary evil. It is true that inflation has its benefits. Rising prices for goods and services can act as a signal to producers to increase the supply of those goods and services, thereby keeping up with the demand.
However, too much inflation can be deadly. Hyperinflation can cause people to lose their life savings overnight. It can destroy business and make it difficult for people to plan for the future. In extreme cases, it can cause massive social upheaval and bring down governments.
What Causes Inflation?
Inflation occurs when there is an increase in the money supply that is not backed by an increase in the production of goods and services. The printing of paper currency without gold or silver backing tends to cause inflation. Governments cannot just print paper money forever because eventually, people will not want to accept the money because they know it is worthless. This leads us to our first law of economics…
The prices of cryptocurrencies like bitcoin, ethereum, and litecoin are skyrocketing. These cryptocurrencies have gained acceptance across the globe, hence their prices have been climbing up.
The market cap for all cryptocurrencies has reached an all-time high of $75 billion. This is a huge increase from the $7 billion capitalization for all cryptocurrencies in March 2017.
Bitcoin was the first cryptocurrency to be created, then came Ethereum, Dash, Ripple and other altcoins. These currencies use cryptography as a form of security as they are decentralized and not controlled by any government or central bank.
Cryptocurrencies have become popular due to the benefits they offer such as anonymity and security. The technology behind them is blockchain which allows them to exist without the interference of any third parties such as banks or governments.
Cryptocurrency prices are determined by various factors including supply and demand but also how much people believe in them as a means of exchange for goods or services. As more businesses start accepting these digital currencies their value increases even further because now there are many ways in which you can use them besides just holding on to them hoping that their price will go up over time.
In recent years, cryptocurrencies have begun to challenge the status quo of traditional fiat currencies. Bitcoin’s meteoric rise has grabbed the headlines for obvious reasons, but it is only one of a number of cryptocurrency options.
In this article, I will provide an overview of what cryptocurrencies are and how they work, before highlighting some of the risks and potential benefits investors should be aware of when considering exposure to the space.
The basic concept
A cryptocurrency is a digital currency that exists purely in electronic form. Cryptocurrencies are not issued or backed by any government or central bank and are instead underpinned by a peer-to-peer network of their users’ computers. This decentralised structure allows them to exist outside of the control of governments and central authorities. There are currently over 1,000 cryptocurrencies in circulation with new ones frequently being launched.
The first cryptocurrency to capture public attention was Bitcoin, which was launched in 2009 by an individual or group known under the pseudonym “Satoshi Nakamoto.” As of October 2017, there were over 13 million bitcoins in circulation with a total market value of over $100 billion. Bitcoin launched a whole host of other cryptocurrencies often referred to as “Altcoins,” and Ethereum is now second to Bitcoin in terms of both popularity and market capitalisation.