In a historic moment, back in 1974, during his infamous “Whip Inflation now” speech before congress, US President Gerald Ford declared Inflation Public Enemy Number one.

Though it is probably one of the most notorious terms in Economics, not everyone has an understanding of precisely what Inflation means or why it is so dreaded by everyone.

Inflation is, in simple terms, the rate of increase in the prices of goods over a given time period (usually a year). So when inflation is high, a given amount of money can buy you less than when inflation is low.

There are two causes for inflation, Demand-pull and Cost-push.

Demand-pull inflation occurs when the demand for goods or services exceeds production capacity. The difference between demand and supply (called the shortage) results in a price appreciation. In Layman’s terms, more demand and less supply means prices go up.

Cost-Push Inflation occurs when the cost of production increases (for example, the price of raw materials goes up). So, in other words, the more it costs to make something, the more the retail price will increase.

Α 2% Economic Inflation level is the ideal condition for any country, as it means economic growth and expansion in both the private and government sector.

Inflation can be beneficial in certain ways:

• It can be used as a means to increase Wages.
• It keeps deflation (which is the opposite of inflation) away by bursting the economic bubble, which could lead to a recession.
• It keeps spending at a constant level, allowing further expansion and investment.

A high Inflation rate, however, can be catastrophic as it can:

• Lead to the depreciation of investments and savings
• Decrease exports and other international business transactions
• Lead to a recession.

At the moment, the world is experiencing a Global rise of Inflation. Geopolitical events are a major contributor, as they affect supply chains and imports/exports of goods and services.

While the ECB (European Central Bank), as well as individual governments, are struggling to fight the issue, for the time being, the fear of an impending global recession seems to be looming menacingly over the world.

Yikes!

Amega

Trade with an award-winning broker! Lowest spreads on the market for Forex, Precious Metals, Energies. No re-quotes, no rejection of orders & instant withdrawals.

Open account

www.amega.finance