Inflation Is 2022’s Boogeyman

cryptonews.com:

Stephen Hickson, Economics Lecturer and Director Business Taught Masters Programme, the University of Canterbury.____

An entire generation has never experienced life with high inflation. But that is set to change. Countries like Australia, Canada, the United Kingdom and others are reporting rising inflation. In New Zealand, inflation has climbed to its highest rate in 32 years. Our collective inexperience with the scourge of inflation, and how to solve it, could be a real problem.

For those experiencing high inflation for the first time, it is helpful to understand just what economists and politicians are talking about.

Inflation is a sustained increase in overall prices. Not everything goes up by the same amount but when people are having to pay more each week, month or year for the same basket of goods and services then that’s inflation.

Inflation is harmful in many ways. It works like rust – slowly eating away at the value of your money. Inflation affects all of us. It doesn’t matter what the face value of your money is – what matters is the quantity of goods and services you can buy with it.

One easy way to understand inflation is to look at what you can buy for the money you have.

Suppose at the start of the year your USD 100 note bought you 20 cups of coffee. However, inflation pushes coffee from USD 5 to USD 6 a cup. By the end of the year, your same USD 100 only buys you 16 cups of coffee. The face value of your money is the same but its real value (in terms of the number of coffees you can buy) has gone down. Your money is worth less now than a year ago.

This rise in costs hurts wage earners who have limited opportunity to renegotiate their wages.

Inflation also hurts those on fixed incomes such as beneficiaries and