Throughout, history, we have experienced, a variety of economic conditions, and circumstances, including, recession, inflation, and somewhere, in – between! For a few years, we experienced, very – low inflation, largely, caused by a variety of conditions, worldwide, and largely, disrupted – by, the ramifications, and impacts, created and caused, by this horrific pandemic! Currently, we seem to be experiencing, a serious amount of inflation, created, by many factors, including, but, not, limited – to post-pandemic ramifications; Supply and Demand issues, caused, to a large – degree, by, supply – chain, issues; maintaining, unrealistically – low, a prolonged period of near – a record – low, interest rates, etc. With, that in mind, this article will attempt to, briefly, examine, consider, review, and discuss, 6 potential dangers, of prolonged periods of inflation, and why, it is important to know, and understand, options and alternatives, to attempt to choose, the best – path – forward!
1. Cost of Living: Some factors, determining, the Cost of Living, include: wages (and wage growth); prices, etc, and how wages, are, or, aren’t able, to keep – up, with the increase in costs, etc! Most realize that we have, in the past – few months, experienced, a huge, jump, in pricing, most – apparent, in the food stores, restaurants, and, nearly, everything, related – to, day – to – day, existence, etc!
2. Federal Reserve: In recent times, the near – historic – low, extended period, of interest rates, has, in addition, to the intended measures (helping businesses, and the economy, in trying – times), caused a Real Estate, Sellers Market, and, a huge rise, in home prices, in most parts of this country! In addition, it created a surge, in consumer use of credit, because, borrowing, appeared, cheaper! However, most economists forecast, that many of these supports, and maintaining, such low rates, will, gradually, be reduced (or minimized), probably, beginning, next year. What impact will that have, and will we see, the historic reaction, which has been, that when rates rise, it helps reduce inflation, etc?
3. National economy/ conditions: Largely, because of a worldwide, supply – chain, set of obstacles/challenges, many industries, have experienced, challenges, in terms of, getting sufficient amounts of needed materials, etc! Go into, nearly, any store, and you will see, more – sparse, shelves, than we have seen, in recent memory! In addition, building supplies, products, food, toys, cars, car parts, etc, are under – stress, because of this!
4. Worldwide economies/ economic conditions: Nearly, every nation, is experiencing, economic issues and challenges! The United Kingdom, because of worldwide, as well as specific national trends/ causes/ conditions, has been large, impacted! Since we live, largely, in a global economy, when there is any disruption, in the supply – chain, it affects, everyone!
5. Stock and Bond Markets: Because of several reasons/ factors, the United States Stock Market, has benefited, significantly, and experienced, significant increases, in the price of stocks. In addition to the obvious ones, because, interest rates, have been, so low, many investors, believed, that stocks, were, nearly, the only game – in – town! When, if, interest rates, rise, bond rates, will rise, and existing, bond prices, will adjust, and drop!
6. Immediate, intermediate, longer-term ramifications/ impacts: The immediate impact of inflation, is, usually, rising prices, and, wages, which, usually, rise, at a far – lower rate! In the intermediate – period, we begin to see, weakening economic trends, and in the longer – term, depending on how long, it ensues, there are often several, undesirable ramifications, and impacts!
Don’t take inflation, and its risks, for – granted! The more you know, and understand, the better prepared, you will be!