| What Are The Causes Of Economic Inflation? |
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| Written by Steven Lo |
| Tuesday, 22 June 2010 08:45 |
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Inflation quietly steals wealth away from productive citizens every year, and yet no one really seems to know what causes inflation. This is very alarming. Common sense tells us that when someone loses money, then somehow, somewhere, someone else will gain it. So when inflation erodes our wealth, who receives the benefits?
Inflation quietly steals wealth away from productive citizens every year, and yet no one really seems to know what causes inflation. This is very alarming. Common sense tells us that when someone loses money, then somehow, somewhere, someone else will gain it. So when inflation erodes our wealth, who receives the benefits? Conventional wisdom dictates that inflation is something that has always been there and everyone has to put up with it. However, money inflation is no gravity, it isn't natural. Inflation is man-made and has always been part of a subtle wealth transferring scheme. Inflation makes money worth less. How can money bills worth less? A 5 dollar bill is a 5 dollar bill right? The market doesn't care if the face value tells you it is worth X dollars. What the merchants and workers are willing to offer at a set price tells us how much money is really worth. There is a set amount of dollars in the system at any time. If there is an influx of freshly printed money into the system, while the amount of real assets and services stay the same, then the money bills will be worth less. The same goods and services will need more money to purchase. In other words, the market determines the value of money based on the rule of supply and demand. The first group of people who receive the fresh money have the advantage, because they get to use the money before purchasing power is reduced for everyone. When the market realizes there is more money in the system, the prices of services and goods will increase. However, the people who are on the end of the queue for the fresh money will pay the cost of inflation when the market has adjusted to reflect the new prices. This is the reason why everyone should invest if they want to protect or even increase their buying power in the long run. In the meantime, it is very important to diagnose the initial signs of upcoming inflation by asking these questions: When was the last time the government released new money into the system? Who is the first group of people to receive this bounty? Are there regulations or policies that encourage more debts? These are the driving forces of inflation that investors will do well to watch out for. If you don't want to deal with the complexities and hassles of having to think about where to protect your wealth, but are not happy with the low rates of return, then you may want to think about buying gold. Gold is the nemesis of money inflation. Inflation steals wealth while gold preserves it. If you can predict inflation by watching for money printing establishments and their next moves, you can predict the increase in gold. If you want to know the basics, please visit the link below. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. Who are the people that receive the most benefits from inflation? Do "they" even exist? See "Why Buy Gold?", and then you may also want to read "The True Cause Of Inflation" by Robert Ringer |