What most Americans don’t realize about inflation


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Joshua Packard, Columnist

Many people familiar with money understand that, in one way or another, inflation is harmful, both to their own personal lives and the economy as a whole. Something needs to be done about it, and that only arises through people’s awareness.

Obvious tell-tale signs of inflation that are quickly noticed are generally higher interest rates, increased gas/housing prices and taxes, and an overall decrease in the value of money, which in turn leads to higher prices of all goods across the board of commerce. That being said, there are less understood or known effects that result in a crippling economy.

I feel most Americans don’t realize enough about inflation and its less understood or known effects that result in a crippling economy.

One may ask: what exactly causes inflation?

The greatest factor perhaps comes down to government spending. If the government needs a large amount of money, new currency is printed by the Federal Reserve. As more money is created out of thin air, the value of the dollar decreases, and prices of all things increase. This extra printing of money predominately boils down to paying off national debts or creating initiatives that I feel many Americans disagree with.

According to the U.S. Treasury Fiscal Data, as of Sept., our national debt is soon to surpass 30 trillion dollars–far higher than a decade ago, and the highest in our history. Unless government dollars go directly to creating new jobs or expanding the markets (which rarely occurs nowadays compared to the vast number of initiatives toward social issues), inflation will continue to rise, and recessions are inevitable.

One consequence often not brought to light, is that inflation helps the rich, and conversely harms the lower class. People experiencing poverty by definition have little money and sometimes being unemployed, cannot afford the increases of prices. 

However, the rich are hardly benefitted by this, particularly big businesses. The value of rich businesses are commonly represented in the value of their stocks. As inflation increases, those stock values do as well, while making it difficult for the less wealthy to buy those shares and make profits from the money that the company accumulates.

 For example, most of the extreme wealthy class hold their money in investments–not cash. When the economy is in the green, a billionaire may invest heavily in real estate, knowing that when inflation inevitably occurs, he can sell many of those properties at much higher prices. The billionaire need only wait until the economy is healthier to invest again.

The middle-class and upper middle-class aren’t out of the clear either. Those who have saved a fair amount of money will find that that money is worth less in value compared to rising costs and may burn through it more than they would a few years ago. If inflation shows no stop in sight, people will be discouraged to save at all, as they know it’ll eventually be worth less than if they spent it right away.

Even less realized is that higher minimum wages are sometimes a bad sign. The more money people need to survive, the less money is worth. People are gleeful when they rake in more money when housing prices go up, but their newfound wages may be harmfully affecting others. When prices increase, an employer doesn’t wish to lose money either. They will pay higher wages at the cost of hiring less or letting off more people. 

The relationship between wages and inflation is incredibly complex, but the observation that unemployment may increase because of weakness of the dollar has been shown time and time again.

Sometimes, a low amount of inflation can have a positive influence on the market. It may increase consumer spending, which in turn ramps up production, labor and the creation of new jobs. However, when it spirals out of control and continually passes the forty-year high day-by-day, people begin to notice it and grow worried about the direction we’re heading, which is valid.

A key thing to keep in mind is that the blame should not be directed toward landlords, businesses, healthcare providers/hospitals, etc. I feel that the majority of economists and businessmen would agree that they are not purposely attempting to be greedy, but simply attempting to not lose money like everyone else. 

The solution comes down to bills and government. If we focused on initiatives tailored to the market for the betterment of our economy; by initiatives, I mean less taxation, more freedom to trade and building of government jobs, we would eliminate a substantial amount of stress from our lives.