Inflation has become the buzzword of the decade. It took off because of the COVID-19 pandemic. For better or worse, the cautious among us wanted to lock down the entire global economy, and they mostly succeeded in getting their way. This led to what can only described as excessive printing of money. In the space of about 1 year, the global monetary supply increased by about 1.5x, and the world lived off of stimulus checks and the labor of essential workers. The effects were felt immediately, but they didn’t totally kick in fully until 2022. Nowadays, inflation is increasing at a higher rate than GDP, which means living standards are falling. Inequality is also increasing, but that’s for another article.
What Is Inflation?
Inflation is the process through which prices increase, or more precisely through which money loses value. Governments print money for a variety of reasons, but it’s usually for the purpose of investing in new sectors of the economy. When the newly printed money is disbursed, that money is used to do work and create new products and services. These new products and services are created through loans on investments. The whole process adds revenue to the economic system. This unfortunately in turn causes the money to lose value, as it becomes less scarce.
What causes inflation?
Given the definition of inflation given, inflation is caused by the increased amount of money in the economic system, and goods and services becoming more scarce in relation to money. This is why different countries have different inflation rate; the have different currencies.
If you are on YouTube or TikTok, you’re going to see a lot of talk about inflation and the economy. Young people, which in this case means people under the age of 40, are struggling to make enough money to live fun and fulfilling lives, while people over the age of 50 seem to be reporting record satisfaction. If you watch mainstream news channels, you might even think that the economy is growing. Unfortunately, this isn’t the case. You see, in order for the economy to actually grow, you need inflation to be smaller than the rate of production. If prices rise faster. It’s kind of a complicated concept, but hopefully the way I explained it makes sense.
Check out this TED talk — How The US Is Destroying Young People’s Futures. It’s by Scott Galloway, a professor at NYU’s Stern School of Business. In it, I think Mr Galloway does a brilliant job of explaining how wealth in the United States is being transferred from young to old. I agree with his analysis and think this is one of the reasons why so many older middle-aged and elderly people don’t feel the contraction. They are taking from the youth in mostly indirect ways. This doesn’t mean life is easy for all members of the baby boomer and silent generation. It’s not like social security pays out 7 figures. But it does increase, and such programs have an effect on the finances of the population.
Basically, unless you’re getting paid by the government, the economy is shrinking and you’re getting less for your money. That is why you might be finding it hard to live and thrive in today’s age. Because the economy is not growing. Check the numbers on global inflation, then look at how much the economy has grown. Prices are increasing faster than production.
Nowadays, most people don’t understand economics. This is in part because they aren’t educated on the subject. In many countries, economics and civics are simply not taught in high school. Neither is budgeting, by the way. Understanding how to manage your money is an obvious skill. It smacks you in the face as soon as you leave the house and enter the real world. It takes far longer for the effects of knowing economics to become apparent. Check out this web page.
Net Worth by Age Percentile Calculator – United States
This net worth by age calculator shows American wealth percentiles (to 1%) for all age groups. See top one percent…dqydj.com
As you can see, this webpage shows the different net worth percentiles in the USA. If you look at the top 1% range, you’ll see that the top 1% of people in their 60s have a worth of about 10x those in their 30s. The people in their 30s could be rich for a lot of regions. They could have great jobs, start businesses, become famous, or inherit money. The older group of people are people who understand economics. The top people over 65 are worth $22,000,000 and up. The only way to get that much money without knowing anything about economics or a craft is to inherit $30 million or win a commensurate amount in the lottery. Whether it’s by starting a business or making investments, the richest people in the United States know more than the rest of us.
Knowing economics will set you apart from many. It’ll help you make the right decisions when young, and help you make good investments when you’re older. Everyone should know the basics of how the economy works, along with how central banks and the stock market function. The overwhelming majority of people find this stuff incredibly boring. Even older people. Most older people just care about home values, social security, Medicare, retirement savings, and whatever boomer war they’re hell-bent on fighting. My estimation is that if you’re at all interested in this stuff, you’re in the top 10 or 20% of people. The best place to learn about economics is actually university, even though I think logical people can call the efficient market hypothesis into question (you’ll learn this hypothesis in one of your first few classes in Economics 101). If you’re curious about learning about investing, I recommend investopedia.com and The Motley Fool, an online magazine. Both of these sources are reputable, and can also teach you about economics. If you take just a bit of time out of your busy life, you can find yourself making massive gains.
