Inflation

If we summarise the economic problems in 2022 - Inflation tops the list.

Even the countries which are the embodiment of economic stability had been showing double-digit numbers of inflation.

We’ll be discussing some basic unheard facts about inflation.

Inflation in general terms has been misunderstood by stakeholders.

Inflation and depleting value of currency are talks of the town at the same point of time, thus inflation is most of the time regarded as the declining value of the currency.

But that’s partially false.

There are two faces of the same coin of inflation:-

1.Decline in value of the currency.

2.Increase in prices of Goods and Services.

It’s important to differentiate between the two because Inflation can be different in different regions whether within the country or internationally.

For example - At present, Inflation in European countries using the same currency differs substantially. Where inflation in France stands at 6.2%, it’s 21.8% in Latvia. Despite using the same currency inflation in Latvia is 3.5x of France. (mmmm why??)

Inflation being one of the major factors that affect the purchasing power of money, reduces the value of money over time. That’s the reason it is suggested to invest in Assets providing a higher rate of return than that of Inflation.

Also, Inflation is defined by IMF as “Inflation is the rate of increase in prices over a given period of time.” and this rise in prices can be translated as a decline in purchasing power.