What causes Inflation, the fire thats burning the world ?
Inflation is arguably the biggest problem in the world which effects the poor the hardest
Every time you go shopping you can feel the pain of ‘Inflation’.
its non-stop , its relentless and effects human behavior deeply.
Checking out old bills from 70s raises deep disbelief in the system ( and rightfully so )
what Causes Inflation ?
The root cause of inflation ( i.e prices going up ) is simple
More Demand , less supply
As demand for goods and services goes up , the prices should go up to match the scarcity.
This is the basic law of economics
However , human ingenuity is such that , when prices of things goes up, entrepreneurs find ways of producing more of it in hopes of making more profits and thus suppress the price of it.
20 years back, most people across the world ( excluding few super wealthy nations ) would buy new clothes once or twice a year
Now, people buy new clothes once a month or even more frequently.
This is primarily because we are producing enormous amounts of cotton and other fabrics.
compared to 20 years back, we are producing way more of every thing
Crude oil, steel , concrete , roads , buildings , Phones pretty much everything.
However the prices of the items are not falling down compared to the supply.
Ever wondered why ?
how are prices of things not falling even when supply is going up 2x, 5x or 10x in many cases ?
This seems to break the basic laws of economics.
you see there is a third secret force that effects prices of things apart from Supply and Demand — Money
Prices of every day goods are denomiated in the currency you use to buy them. So when the supply of currency goes up, there is more currency chasing the same basket of goods and services and this results in prices going up.
This dear reader is the true secret of ‘Inflation’.
Government's world over print money non-stop, some like US Fed used to print less like 7% a year (now printing 10–15% per year owing to huge defecits) , where as Central bank of Argentina prints 100% more money every year.
Politicians love to blame inflation on supply chain issues , weather, Russian invasion and what not, while supply chain issues and weather does effect the prices in short-term, the long-terms price rise is undoubtedly due to the non-stop money printing.
The official Inflation Numbers are a lie
Governments world over lie about the inflation numbers because there are many govt programs related to the official numbers.
US Fed in their ‘enlightened intelligence’ removes cost of Housing, Food and energy from the CPI calculation as they are highly volatalie
Removing the biggest line items of a household budget is nothing but a blatant lie.
On top of that govts keep dressing this number up so it looks smaller than it really is.
The reason why they do is simple, if real numbers are released it would you shock you and depress you.Most people don’t get a salary hike or bank deposit rate that can beat true inflation.
why governments love inflation ?
Governments love inflation cause it makes people rich on paper, your house price keeps increasing and makes you feel richer which pushes you spend more and pay more taxes.
The reality is many more houses are being built annually many better than yours, workers are relocating to suburbs owing high cost of living in cities and yet the house prices seems to be going up, wondered why ?
Because govt is printing more and more money which is increasing prices of everything.
The Solution
we need a better money , that cannot be simply printed by Govts.
Gold and silver used to be that money.
when Gold coins were used as money prices over 100 years used to go down, unbelievably.
For the last 300 years, Global commerce has exploded, Gold as a metal based money is not able to accommodate this rapid growth in trade.
Gold has few fundamentals flaws for trading in the Modern world.
Gold coins are hard to verify and even harder to transport.
Modern banking was created to resolve these issues as traders had diffuclty in securing , transporting and trading with Gold coins. But, the banks world over colluded with governments and slowly but surely replaced Gold backed notes with just fiat currency notes and killed ‘Gold standard’
Ultimately gold failed as currency as its destined to fail in the Modern world ( Gold/silver standard cannot survive except in violent and trust-less world which we humans had to endure right up until the Industrial revolution).
Gold is hard to verify , harder to transport , easier to confiscate.
Bitcoin fixes these issues.
Learn all about Bitcoin and why its the greatest invention of 21st century.
Unfortunately, Investing in ‘Real estate’ is not a panacea against inflation, here’s why.
