When we’re handling our finances and we’re planning for something to do with our money, we always consider inflation since it’s an important factor.
We’re used to this term, and we might think it is normal, but actually, inflation harms our finances in a way that it’s not fair for us.
What is inflation?
We all know that inflation is simply the consistent depreciation of our money in time, and this concept is quite easy to understand.
Some countries might have greater inflation, and in those places, it is not safe to make investments, and some others might have steady inflation, which is good for the residents and the people who want to invest in that currency.
But in reality, inflation occurs because the government is printing money, which means that there’s more cash in circulation, and this causes the value depreciation.
This means that the economy is not improving, and since there’s more money in circulation, the value of currency starts diminishing.
This is something that happens every year, and it’s not for the benefit of the people or for having a better economy, it is just value that’s taken away because of the government.
What is the purpose of inflation?
While the inflation harms the economy and makes people lose value on the money, the government is the only winner here since it can spend more by having more money in circulation.
This situation has happened throughout history and in many cases has led the currency to become worthless, which is currently happening in Venezuela, for example since they’re living in a hyperinflation economy.
So basically there’s no point in printing more money since it doesn’t have a positive impact on the economy, the government just does it to spend more.
What are the effects?
The inflation doesn’t add any value to the currency; on the contrary, it’s progressively making it virtually valueless.
When the government prints money and spends it without any consensus, the effects of inflation are not perceived by them since the effects start showing in the economy after that.
The cost is absorbed by the economy, which causes the currency to weaken its value, but the government isn’t affected by this.
One of the reasons that the government gives for printing money is that it can improve the economy during difficult times, but this is a terrible argument since it causes more negative effects than positive ones, such as:
It becomes unprofitable for the person to save money
It causes to make riskier decisions with the money
It causes instability in the economy
The money becomes worthless rampantly
It steals the money from the citizens
Inflation should be considered as something normal, and it’s not part of a healthy economy. This is why everybody must know what’s behind this process.
Nowadays the inflation rates are higher than ever, and this is because many economies are functioning based on fiat currencies, which is worsening the scenario and it’s stealing money to the citizens to inject it in the economy.