204 Understanding What Inflation Is Helps One Navigate It

What is inflation? Inflation is the increase in the price of
goods and services over time. Inflation causes your buying power
to erode, meaning that the same dollar today buys less in the
future. The bottom line to this story is too much money chasing
too few goods and services.


What is causing the current challenge when it comes to inflation?
The market power and the poor media coverage of this market power
have provided corporate America with price-gouging that is
fattening corporate profits, it's all about shareholders. Sadly,
inflation is hurting American households, but the underlying
cause of inflation is a lack of competition in addition to
corporate greed.


Here are a few factors that cause inflation:
Demand-pul inflation - Demand-pull inflation happens when the
demand for certain goods and services is greater than the economy's
ability to meet those demands. When this demand outpaces supply,
there's an upward pressure on prices — causing
inflation.Cost-push inflation -  Cost-push inflation is
the increase of prices when the cost of wages and materials goes
up. These costs are often passed down to consumers in the form of
higher prices for those goods and services.Increased money supply -
Increased money supply is defined as the total amount of money in
circulation, which includes cash, coins, and balances, and bank
accounts according to the Federal Reserve.Devaluation - Devaluation
is downward adjustment in a country's exchange rate, resulting in
lower values for a country's currency. The devaluation of a
currency makes a country's exports less expensive, encouraging
foreign nations to buy more of the devalued goods.Rising wages is
exactly what it sounds like — an increase in what's being paid to
workers. Wages are a cost of production, if wages rise a large
amount, businesses will either have to pass the cost on or live
with lower margins.Policies and regulations - Certain policies can
also result in either a cost-push or demand-pull inflation. When
the government issues tax subsidies for certain products, it can
increase demand. If that demand is higher than supply, costs could
rise.

The financial takeaway: Inflation, generally around 2% per year,
is a normal part of our economic system. Under normal financial
circumstances, this means that your money is worthless each year
unless it is gaining an interest rate greater than or equal to
inflation. To ensure that your money is keeping pace with
inflation, consider annual salary increases or cost of living
adjustments by your employer. 


Investing your money is also an effective tactic to beat
inflation as well. The interest rates you earn on your savings
accounts will not likely cover the rising prices. The only caveat
is if you have funds invested that are earning a higher rate of
return than the inflation rate,


Paul Lawrence Vann has one last thing to share and it is this,
recommend Wealth Academy Podcast to your friends, family, and
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