The Rise of Inflation
What is inflation? It is an increase in the price of goods or services because rising production costs, increases in product demand, and supply chain issues have weakened the currency. The Consumer Price Index (CPI) measures inflation by monitoring elements of our daily lives such as housing, education, and transportation. The Federal Reserve aims to maintain inflation at 2% or less, but in 2021, the U.S. CPI rose 6.8%, which is one of the biggest jumps in inflation rates in more than 30 years.
America has a long history of inflation with the 2008 Great Recession being one of the most recent inflation incidents. Unfortunately, the U.S. began to experience another inflation event in 2021 as prices rose 15.53 times higher than the average prices of 1921. Compared to the previous few years, healthcare prices rose by 6% while food prices rose by 8.3%. Used car prices have even increased to almost 30%.
Over the years, the U.S. has come up with ways to control runaway inflation, including decreasing prices of bonds and increasing interest rates. Unfortunately, these “solutions” can occasionally cause problems such as reducing spending power and creating recessions. There are several negative and positive consequences of continuous inflation such as lower unemployment, higher wages, growing interest rates, and greater cost of living.
Thankfully, there are ways to protect yourself from completely succumbing to the effects of inflation. Purchasing property like getting good rentals can provide a 10% return on investment while considering commodities like foods and industrial metals can result in up to 19% return on investment.
Inflation is here, and it will probably stay for a while.