Inflation and the global economy today
Posted On March 25, 2022
The effects of inflation are everywhere around us; from the rising prices of buying groceries to the recent decline in the stock market, rising inflation can be costly for consumers, stocks and the economy. Rising inflation is when the purchasing power of the dollar is going down, causing the prices of goods and services to go up.
Currently, the increase in cost is staggering, with the U.S inflation rate reaching 7.5% in January, the highest it has ever been in nearly four decades. Although high inflation can stimulate job growth, it also increases costs for many companies, causing some to stop hiring or even lay off employees, drastically affecting the global economy.
The prices of goods and services are going up because there is too much demand with the constant supply shortages. The current surge in prices is largely due to the pandemic, with the many stimulus packages the government sent out in the past mixed in with the lack of supply for many goods and services.
Although the rate of inflation is increasing drastically, wages are generally staying the same, and money is not worth as much as it was used to, potentially causing many families to have financial struggles. According to a 2021 survey, roughly 45% of households are being hurt by price increases. These effects were more pronounced in lower-income households, with 71% of those making less than $40,000 a year saying they experienced hardship.
During times when inflation is extremely prominent, it is extremely important to invest in assets that will go up in value, because cash is losing value rapidly. For example, gold and real estate investment trusts could provide stable and consistent growth while knowing that these are relatively free of risk. In addition, buying and holding quality companies in the stock market can offset the effects of inflation.
Inflation may have many detrimental effects on everyday life with the cost of prices going up everywhere, but there are plenty of ways to protect our own assets.