Global Inflation Crisis?
Global inflation crisis. What is global inflation’s role as a cause of the financial crisis?
The global financial crisis seems to be an increasingly popular and powerful subject – having an increasingly itching effect on the flows of currency and the thirst for profit.
Even if you choose not to tune into the top GFC news, a GFC newsletter, investing information, you may be one of many who has been inundated with written and verbal recitations of this phrase – global inflation.
What could global inflation crisis mean for me and my financial security?
Is Global Inflation an Issue?
Currently, according to resources such as the Peter G. Peterson Foundation and the Trends Research Institute, as well as rivers of statistics, surveys, reports, documentaries, books, and gfc charts imprinted with financial rhetoric and emboldened warning signs, the United States has been experiencing a suffocating inflation for decades and is facing a fundamental financial rebirth due to hyperinflationary death.
Although the GFC is characterized by numerous nations feeling the forceful impact of the financial crisis, the US financial system in particular seems to be a system that is Born to Die.
US hyperinflation crisis – a tipping point – to inflation crisis.
Inflation and particularly hyperinflation can be vitally important, can they not?
Well, suppose we review the possible importance of global inflation by simply defining inflation.
What is Inflation?
Inflation is when the purchasing power of a currency falls.
The result of inflation is that more increments of currency are needed to purchase goods, for example if the inflation rate rises to the extent that a currency’s purchasing power falls by 25 percent, then 25 percent more currency is necessary to purchase the same goods as before inflation rate rose.
Money loses value, more money is needed, therefore, if the currency falls by 25 percent, then prices can rise by 25 percent. Global inflation is a prime cause of the financial crisis.
One simple definition of inflation is an increase in prices.
Definitions of Inflation
There are four simple definitions of inflation one can use for assessing the importance of inflation crisis and understanding the role of inflation in collective and individual financial well-being – particularly during the GFC.
- Currency losing purchasing power
- Rising prices
- Money supply greater than money demand
- Hidden tax
Money Supply, Money Demand
Inflation is the result of having too much money relative to the amount of goods and services available to purchase with that money.
Global inflation = global money supply > global money demand.
The aggravation of global inflation is closely related to the GFC.
Here is an example of the development of inflation:
There are three people in my community and 3 bills available – one for each service provider. If one of the service providers no longer provides their service, then our economy is heading towards inflation, because now there is still 3 bills available, yet one less service to trade for. Thus, now that there is more money available per service provided, I can pay more to the service providers as incentive for enhanced service and the service providers can raise their prices to reflect the rise in money supply.
Money supply greater than money demand is a fundamental cause of inflation.
As money supply continues to grow in excess of money demand, the result is inflation crisis.
Hence the rising food and energy prices right now.