Inflation

What is Inflation?

Inflation is a decrease in the purchasing power of money.

Another way to say this is the rate of increase in prices over a given period of time.

This is reflected in a general increase in the prices of goods and services in an economy.

It is typically a broad measure, as in the overall increase in prices or the increase in the cost of living (gas, food, rent, etc).

This chart shows the devaluation of the US dollar over time.

Above is an example of inflation’s effect on coffee.

Above is a depiction of the overall CPI and how some of the categories within it have been affected.

Why is it happening?

The main reason inflation happens is by printing too much money.

To simplify this concept- if you are trying to sell rocks and you had 10 rocks they would each be worth more but if you had 1000 rocks they would each be worth less.

In order to keep the economy running during the pandemic the government issued stimulus checks.

• This money did not come out of thin air rather the treasury printed all this money which devalued the dollar.

Inflation in the US is one of the highest in the world right now with a 7% increase in 1 year.

• In fact, it is the highest rate in the US in the last 40 years.

Another issue is too much money to chasing too few goods.

• People have money they want to spend but this causes scarcities (+ the supply chain issues) so these items are harder to get making them more expensive.