What is Inflation?

What is Inflation?

My dad used to tell me stories about how he would get a $0.25 allowance, and he could take his girlfriend to the movies, buy popcorn and drinks, and still have a nickel left over. He was talking about the 1960’s, in small town Pennsylvania. I don’t know if he was exaggerating or not, but I do know that prices have risen a lot since then. Wages have also gotten higher, but the way things sit at present, they have not kept up with the cost of day to day living. We have all felt the effects of these rising prices, as the same money we made for the last few years does not seem to be stretching as far. Groceries, gas, housing, and almost everything else all cost more. A dollar just doesn’t buy as much as it used to. That is called inflation.

It is a normal thing for prices and wages to increase over time. It is when the two do not rise proportionately that inflation starts gaining a lot of attention. It is caused by a massive number of factors, from social change to politics, to global pandemics, and it, in turn, affects almost everything. The cost of production goes up as the parts get harder to access, so prices go up. Wages go up, so people buy more, which makes companies think they can charge more, so prices go up. Interest rates were very low, so more people bought homes, until there weren’t very many homes to buy, so the price of homes started going up. The government raised interest rates, so less people could buy the few houses that are left, in hopes that inflation settles down. So far, it hasn’t made much of a dent in inflation, but now the banks are struggling.

Right now, everything is expensive. It doesn’t seem to matter how much money people are making, they are still feeling the pain of the increased cost of living. There is no easy fix, because there are too many factors at play on a global scale. It isn’t just one thing that causes it, and it isn’t just happening to one country. It could take years for things to balance out again.

In the meantime, we have to look for ways to stretch our hard earned dollars. Eat at home more. Hang out with friends at someone’s house, instead of going out. Don’t buy that new pair of shoes, or new car, until they are really needed. Put money in savings if you have extra at the end of the month, and take advantage of rising interest rates to earn money on your money. Try not to borrow money if you absolutely don’t have to, be it from credit cards or banks.

No one can see into the future, but if history is any indication, things won’t always be this volatile. Inflation will never disappear, but it will likely cool off, if we can just wait it out. Actually, not buying things and not borrowing money helps inflation settle down faster. So, let’s all work together, shall we?

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