Inflation has become the buzzword ever since COVID-19, everyone is throwing it around like it’s the reason behind everything. Why are your grades down? Inflation. Why did you break up? Inflation! Why is everything so expensive?!! Inflation!!! Well, the last one is, unfortunately, true. So, what is this mysterious inflation that’s looming over us? How does it happen? And what does it have to do with you?
Economy’s Mid-Life Crisis
It is essentially the price hike and the decline of purchasing power—AKA your money’s worth lessens over time. This is because when the prices increase, your income usually doesn’t - unless you have a really understanding boss! So if your income doesn’t align with the increased pricing, it could be hard to cover the cost of your day-to-day expenses. Perhaps the most recent example of inflation is McDonald’s. I mean, sure we all have fond memories from our childhood and it’s why we go back to it. But, seriously EGP 145 for a Big Tasty meal?! No, thank you!
More is Less
Inflation has a ripple effect when it comes to consumerism as people begin to freak out and stock up on goods. So let’s say you buy bulks of sunscreen ahead of inflation, the demand would then get higher than the supply and the prices would increase. And this is exactly why governments can’t just print more money! The increased demand would mean more money which would mean an increase in money circulation which would mean that more people will want to buy the same commodities and in turn hike the prices.
But the “upside” of that is that at first, it could create new job opportunities to keep up with the increased demand and it may even increase profits and boost the economy. Workers could even demand and succeed in getting a raise. However, the higher the inflation rate gets, the more these “upsides” lose meaning. Why? Because of the same vicious cycle of the price-wage cycle.
You, Me, and Inflation
Inflation is not unfavourable for some people, though. Knowing where to put your money is important regardless of inflation and cash is not king during that time. If you have non-financial assets like real estate or gold, then you’re in luck. The value of tangible assets is most likely to go up as inflation grows. So you can sell them at a higher price than the one you paid for. However, if you’re buying, luck won’t be on your side!
As individuals, we can’t really do much except ride the wave of inflation. It’s inevitable, it isn’t the first time and won’t be the last, but this too shall pass!