What is it
Inflation is the rate of increase in prices over a given period of time, this happens due to a country’s government printing too much money, therefore decreasing the value of the currency. The U.S. and many other countries are dealing with this problem, and many are now asking themselves how we can control inflation.
The problem
Theoretically printing more money gives a country more money, but what really happens is the money becomes less valuable meaning that the currency is worth less than it was before. Because of this issue goods and services cost more money, and workers demand more money to keep up with inflation. Another problem due to inflation is for importing and exporting. When you import something you have to trade, meaning that you have to export something to them, and the way this works is because of currency exchanges. Do you ever go to ATM’s and switch out your money with the currency from with the country you’re in right now? If you haven’t then you put the money you have in the ATM and the new currency comes out, well because of inflation if you put 5 USD in an ATM at europe than you would get $4.49. In fact 1 USD = 0.90 euro.
The answer?
if you were to ask someone how to stop inflation they would either give you a long answer or a short answer. the short answer is that the government simply has to stop printing and spending so much money. The long answer however is a lot more logical, in the US, our financial regulation comes through the Federal Reserve. One of the ways the Federal Reserve is working to combat inflation is by raising interest rates. This means if you take a loan for a house the interest is going to be higher than normal. For example the interest rate in 2011 was 4.45%, now in 2023 the interest rate is 5.6%. Another way the Federal Reserve is working to combat inflation is by encouraging people to buy more than usual. They do this because the U.S. is technically in a recession because of the inflation, as a result buy encouraging consumers to buy more they are slowing down the recession therefore slowing down the inflation.
Ok…but how can I completely stop inflation
The special part about inflation is that you can never actually stop inflation, its always going to be there. However what we can do is slow it down. If you want to combat inflation here’s what you can do
- keep investing (stocks bonds real estate)
- ask for a raise at your job
- reduce unneeded expenses
- pay off any debt you still have (car loans house loans mortgage ect)
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