I have been hooked about discussing every nook and cranny relating to business and economy for a while now.
People are hysterical when hearing the word inflation. Some misjudge it and blame the government, and some individuals try their best to readjust their income. This jargon had been a common misconception on society for a while. While it is true that every person must care about inflation, people should not be afraid of inflation.
In the broadest term, inflation happens when the price is rising. So, receiving a 10% raise almost doesn’t have any effect if the price of daily goods increases by 10%. The result of inflation can be minuscule or catastrophic, whether it’s managed or not. Usually, inflation that sparks protests is uncontrolled.
Yet, people still don’t understand that inflation is not the end of the world. Instead of protesting and insulting the governments, individuals should know that there is an external factor contributing to inflation. Hence, people blaming only the governments are rather unwise and foolish.
The Misguided Majority
For most people, inflation means that the economy is not doing well. If they can feel that their buying power is dropping, they are right. But if the effect isn’t noticeable, individuals shouldn’t be concerned. No matter the condition of the economy, a person could keep their wealth by being wise regarding their money. This matter should be observed and handled by experts only, such as governments and economists.
Using the expert’s definition, the value of money is inflating when the prices of daily goods are rising while the wage is stagnating or even decreasing. Hence, the cost of houses keeps soaring every year, but it cannot be classified as inflation because it is not one of the daily goods. On the other hand, it will be inflation if the price of bread increases even by 0.01%. This explanation proves that what people think of inflation is rarely true.
“Never underestimate the power of stupid people in large groups.”
— George Carlin
People are afraid of inflation because they want to be wealthy. If the economy is improving, they believe that it will be easier to get more money. Individuals should know that the market works as an equilibrium. According to that law, capital is the inverse of goods. If every person is holding tons of money in their bank accounts, there will be no incentive to make products. Therefore, people won’t have anything to buy. This false idea that people believe may arise from the wrong understanding of wealth.
Having a lot of money and being wealthy are two different things. John may receive one million dollars income per year, but he will not be wealthy if his expense is 990.000 dollars per year. From this example, the concept of wealth in the majority of people is wrong. Then, what is the parameter of someone to be called wealthy? By economic standard, a person is wealthy if he/she has an above-average buying power.
Indeed, most people with exceptional buying power have more income than the average person. But people should understand that as long as an individual can have more bread than the majority of people, he is wealthy. Therefore, what governments try to achieve is a stable price and not cheaper goods. If the price is steady, people have ample time allocating their resources to improve their lives. It is crucial to understand that given enough opportunity to grow is much more beneficial than having a burst of time to jump.
Therefore, people should not be hasty when making decisions of wealth. For example, the crash of the stock markets caused many to abandon their job and can’t feed their family because of the inflation effect. The house price crash also happened because individuals believed that the key to getting lots of money was to buy a house and sell it at a higher price. People nowadays must learn from past examples to treat their wealth better and avoid trapping itself in a bubble.
The Not So Beautiful Bubble
A bubble is an economic term to call something that has rapidly increasing values, but it is anticipated to crash sooner or later, causing its value to inflate. If there is a new trend suggesting that following them is the way to get rich fast and trouble-free, it is most likely to be a will-crash bubble. Therefore, people should be aware that there is no easy way to become rich. But there is a quick yet demanding way to get wealthy, such as inventing successful applications or investing in a promising startup— it isn’t any dime a dozen.
On the other hand, an investment that keeps on rising to absurd values is not considered a bubble unless it is improving too fast and going to crash. Hence, this investing is the one that is suggested for inexperienced people to try buying. Professionals will also try to get into this kind of expenditure if possible because it can’t and won’t go wrong.
After understanding this idea, people must be able to tell if the economic trend is a bubble or not. If they still can’t find the difference, they should consult an expert in this matter. Contrary, the experts on investing expertise aren’t hard to find. They are plenty of them on the internet, but they cost some money to receive their ‘treatment’. This service is worth considering because the amount of money that could be lost or received is huge when discussing investing or stocks.
Inflate Your Thoughts to Increase Wealth
Instead of fearing inflation, we should try to inflate the problems in our lives. We can indeed protest everything that makes our economy worse, but we must still combat economic problems with rational decisions. If our mind stagnated only from one perspective, we would not be able to think of all possible solutions. So, we should be aware of the economic sector while trying our best to increase our wealth.
“When money realizes that it is in good hands, it wants to stay and multiply in those hands.”
— Idowu Koyenikan