Topic: Why Inflation is a big problem for a country? (Read 602 times)

Inflation occurs due to many factors, one of which is because the amount of money in circulation is too much so that its value is not valuable for scarce necessities.  This condition is not good for people to borrow money from banks, because with inflation conditions, the central bank will definitely take a policy of raising interest rates so that people save more of their money again.  This condition will make it difficult for people to get loans with low interest, this is my understanding.

It is true, inflation makes people pay their loans back easier, it makes earning money harder because there is usually a higher unemployment rate but if your job is stable and you are earning accordingly, then you will make more. So, let's assume that you make 10k per month, you live the USA and you just had around 7% or so inflation right?

You tell your boss you want a bigger raise than inflation and get 10% raise for this year, not really possible since bosses would want to pay even less, but assuming you are a vital employee (which you could be with 10k per month) you manage to get it. Now you are making 11k per year.

Assuming you got mortgage payment of 5k per month, you used to have 5k left after you paid it, now you have 6k left to pay it. Next year, same thing happens, now 10% would mean 1.1k more, so you make 12.1k dollars instead, and you still pay 5k, left with 7.1k instead. Year after that same thing and you get 13.31k per month, and still pay 5k. You can calculate it for 10 years.

By the end, you the debt would be nothing to you and you would be making a lot more and you would pay your mortgage very easily. Now imagine living in a nation with 20%+ inflation, your debt would be nothing in a few years.

Inflation can devalue any debt including personals? Really? Idk but this sounds good to me, this means it is the best time to take a loan during the inflation period because people can pay lesser but loans in times of inflation are unavoidable because its a tough time for everyone. Prices are getting high and people only have a limited money to afford it.

If inflation makes it hard for someone to plan long term then why not plan early or plan before inflation occurs? In that way they can combat the effects of it and they can survive until the inflation rate gets lowered or totally subsided. Inflation is a big problem but only for those live's who have no direction.

Quick increase in inflation rate yearly is alarming because it just means that the prices of the goods and services will also increase. Inflation itself isn't really a bad thing like what some perceive it to be. It just becomes a negative thing when it is fastly increasing and it is not proportional to the country's ability to increase the salary wage the same pace. Higher inflation rate as the time goes by just simply means that the commodities and other materials as well as the services offered will be increasing their price and value due to the demand. If inflation would constantly increase, people most particularly those who resides in the lower bracket of the community will suffer the most. They would be the ones who will be very affected because most of them are just living paycheck to paycheck and barely makes the ends meet.

If the goods sold and services offered will be higher than it originally was, they would have a hard time adjusting and adapting to the changes. If before they are already having a hard time, they would have a harder one this time in thinking where to get the money to sustain their needs to get by on a daily basis. Hence, the government must do something about it or else the citizens will suffer. The cost of living and the price values of goods and services should be balance and proportional.

A lot of them are seriously trying as much as possible to escape inflation, and it has been a big problem which has put them in a really bad situation as of today. If you check some of these countries around the world you see that they are suffering seriously from inflation and you would see how the prices of things has gone up and how people has gotten really poor, and the value of their currency it’s nothing good at all, as a result of the economy is down.

 I believe that the government of these countries has many options that they can use in fighting inflation. they can decide to make use of Wage and price control in beating inflation, although that may lead to recession and loss of jobs. But there are still other options, it is up to them to sit down and plan it the right way and make their decision on how to go about fighting this problem of inflation in their country, in a way that it wouldn’t affect them so bad.

The governments don't really want to stop inflation,because:
1.Inflation leads to debt devaluation(including government debts).
2.Inflation boosts the tax revenue.AFAIK,this is called "inflation tax".
Bigger revenue from VAT taxes and income taxes is what every government in the world wants.

The governments/central banks want to put inflation under control,by lowering it to levels below 5% per year.
It has been stated by many economists that low inflation can be actually good for the economy.
High inflation is a big problem,because it increases the poverty among the working class people and it disrupts the business cycle,making it hard to many business owners to plan their investments in the long term.
 

and the country with the highest inflation is Venezuela which ends 2021 with inflation of 686.4% and this is the longest hyperinflation. Venezuela's hyperinflation just happened, even though the central government did not take any action to stop the extreme inflation. they just stop the cause without doing a full solution to avoid higher inflation.
Even though Venezuela is currently out of hyperinflation, it is still the country with the highest inflation rate.

It is very much possible for the government to control inflation, but I just don’t get why they don’t do it. Although trying to stop inflation it can also have its own consequences, but I still believe that if the government should go about it the right way then they would be able to pull it off properly.

The thing is, do our leaders really care about us that much? Because this is not the first time that we are seeing inflation, it has been happening for a very long time, and as a matter of fact, lots of economists keep predicting that such will happen, but it seems like the government would go ahead to ignore all the warnings that’s not been laid out.

Since the first, inflation is the enemy of a country's economy. When inflation occurs, money becomes worthless. however, as far as I know, the way to deal with this, or slow down inflation, is to increase tax rates, increase the quantity of goods in the market, set ceiling prices, save on government spending, and so on. however, this can be minimized. very many countries have been hit by inflation, and it is still running today. they solve their problems with several strategies. however, until now, there are still some countries that are still struggling to escape inflation.

Crypto and foreign FIAT.

It is curious you put it this way, because the other day I found a clothing store which now accepts Bitcoin, Thether, Binance pay and more suprisingly: Monero.

Crypto currency is a blessing when comes to helping people like us, to recover some control over our money in an authoritarian and reckless administration.

Venezuelans have known well about inflation, being a Venezuelan what is said above is the truth. Compared to the previous years Venezuelans seems to recover slowly through the adoption of cryptocurrencies, making use of play to earn tokens and exploring all available possibilities on cryptocurrency. I read about people in Venezuela having cryptocurrency as a common means, even the technology wise lacking people have begun to make use of it through Binance pay and other similar payment gateways. Being the 7th largest population for cryptocurrency adoption the growth will happen soon out of cryptocurrency. The inflation is mostly out of the ruling government who doesn't care for its people rather a specific group.

As Venezuelan, I have seen how inflation can literally destroy people's lifes.
Thankfully is slowing-down lately.

I believe one of the things necessary for inflation control is a serious and pragmatic macro-economical plan carried by one's country central bank which is independent of the extreme political ideals of the ruling party. One of the biggest mistakes commited here was giving more valuble to economic theory than long-proved economical actions which work, just for the sake of whatever the president and the party wished to implement.

The well-being of people must be above social/economical experiments, specially if one's trying to face such a serious problem as inflation.

Unfortunately the inflation is more faster to come than salary increase since government is so slow regarding on handling this issue but for us to avoid any of this things maybe its best for us not to let our money sleep in the bank since for sure we will badly hit by inflation since as you said the purchasing power will not be the same when we first deposit our money their so best we should put our funds on something that can generate us money since this could save us from inflation.

If the government keep increasing salaries and wages to meeting up with the level of inflation so that the people won't feel the negative impact of cost of living, things, products and services will keep rising and to a higher level where it will become hyperinflation and nothing will be of value, it is not good to keep increasing salaries and it is worthless to use it to purchase goods as the value will reduce.



You are right but printing of money is not the real course of inflation because they were used for buying things to distribute to people but the challenge why it push up inflation because capital project were abandoned and circulation of money increased.locked with people.

Well said. Inflation may not be a big issue on regular people if there are also seen increased in the wages on the minimum earners. Even if this fast rising inflation continue to increase, as well as the wages of the people too, there will still be high purchasing power just like before inflation has started. But as most of the countries have failed to control inflation, so we should just accept the fact that saving more this time and investing into crypto may protect us from inflation, as crypto has always been showing deflation.

The rate of inflation is now alarming. Inflation is rising worldwide at such a rate that even countries like the United States are facing it.

Although inflation has not been such a big issue in some countries in recent years, but you can check the data of low per capita income countries. Inflation is nothing new there. Not everyone is suffering from the problem of inflation. Many are also taking advantage of it, so the profits of the major companies are not low. People are very stranger creatures, they do not think about the problems of the country or others. whatever the situation, they want to achieve their own interests.

Inflation isn't actually a problem, we just accept it to be a problem because wages growth doesn't coincide with inflation. Granted, it's unreasonable for wage growth to keep up with inflation if it's something like 5 percent; if the banks target inflation at 2 percent and actually manage to keep it there, there wouldn't be any talks about inflation because most people in a working economy can garner a 2 percent wage increase year over year.

Issue right now is most countries shut down their economies for COVID while increasing the money supply, so the economic growth was not able to keep up with disproportionate amount of money that was being spent. Wage growth might've gone up by 2-3 percent if you're lucky, but inflation could've been at 5 percent plus, meaning you have less purchasing power.

I guess everyone is affected by the inflation, even the government officials that are being highly paid. So i cannot attest to that the government is not doing an action, of course they are doing it but most of them did not succeed. And for some reasons, once there is already an inflation, it will be hard to stop that but it can somehow be reduced. Here are some methods on how to control inflation. Source: https://www.economicshelp.org/blog/2269/economics/ways-to-reduce-inflation/

First, we need to divide inflation into several types:
1. Negative
2. Zero
3. Moderate
4. High
5. Galloping
And accept one simple thought - inflation is a concomitant process of any monetary system!
Is inflation good or bad? The question seems to be simple, but very ambiguous. It seems that when there is no inflation, it is good, but then there are processes of "freezing" large sums of money in deposits. Is that bad. With moderate - yes, there is a process of "cheapening" money, but mechanisms appear that force this money to be used for its intended purpose until it has depreciated - to buy goods and services, to invest - this is useful for the economy.
High inflation, and even more so galloping, is very bad, such inflation really kills the economy and drives the population into poverty.

Inflation in simple term what we saved today becomes less valuable by tomorrow. This happens out of different reasons. Inflation can be easily understood when there is increase in the goods and services cost, particularly the basic needed things. The beneficiaries out of the inflation is the huge industries that charge additional amount for same products.

There won't be circulation of money. More currencies will be printed to make the situation normal. At some point there'll be increased production, and there won't be end consumers. Inflation can be kept under control by the governments economic development team, but majority fails in it.