Not every inhabitant knows what inflation is , but the term itself is well known. Regularly in the news they report how many percent this level was. Analysts inspire fear, and ordinary people who do not have an economic education can not always understand whether everything is really so dangerous or whether it simply stirs up horror without real reasons. To be able to adequately assess the situation, it is reasonable to understand the terminology, familiarize yourself with generally accepted definitions, you need to know something about this.
Urgency of the problem
Recently, they hear that inflation is an everyday phenomenon of the domestic economy, all of our fellow citizens. Severe situation, market crisis, world-class problems - all this affects the situation within the state. The national currency is gradually losing ground, and prices are rising. Some 6.5% there, voiced in the news, few people are afraid, but here the rise in price of usual everyday goods in a supermarket by 50-70 rubles, or even twice - this is an occasion to worry about the future.
In fact, inflation is not a price increase in itself, but these processes are closely related. Both the weakening of the currency and the appallingly fast change of price tags in the store are the accompanying inflation phenomena. In order to alleviate the current situation a little, efforts should be made at the federal level, attracting the most promising, qualified analysts. Unfortunately, the average person cannot influence processes of this scale, but understanding the terminology in order to understand what is happening around is a sensible approach.
Clearly and clearly
If it is explained as simply as possible, in general terms, then inflation is a decrease in the purchasing power of money in circulation within the power. In practice, the process is expressed by raising prices. Suppose a person has 25 rubles. At first, two loaves could be bought for this amount, and after a month - only one. This means that the purchasing power of the currency at the disposal of a person has been halved, along with it the possibilities of the owner of the financial mass have decreased.
The essence of inflation is to preserve the volume of products and goods, the purchase of which now requires more money than some time ago. A negative feature of this situation is that the income of the population (in most cases) does not change, so the next increase in store prices is a serious blow to the family budget and leads to a decrease in the quality of life of many citizens.
Economics and terminology
Real inflation is an obligatory economic component for absolutely any power. This phenomenon was in former times, and is in our days. It does not always reflect strictly negative changes in the economic structure of the state. There are several basic forms, the analysis of which helps to assess the economic factors that shape everyday life, the capabilities of the townsfolk.
Of the forms of inflation, the most familiar to everyone is the price increase, expressed by leaps, associated with a decrease in the value of the currency. However, the types of inflation include a depreciation of the national currency. A comparison is made with some stable foreign. A good example is the recent crisis, when almost a hundred rubles were asked for one dollar. If you raise archival information, you can find out that in 1991 the dollar was worth only 90 cents. Inflation is also the increase in the price of gold, reflected through national currency.
What is the practice?
For the average person, the most pronounced consequence of inflation is the increase in the price of everyday goods. True, you need to be able to distinguish between different reasons for the rise in price. Inflation is far from the only factor provoking a change in information on price tags. So, in certain seasons prices for specific goods rise. This is explained by the desire of any entrepreneur to secure the maximum possible profit for a product, the demand for which is currently especially great. Accordingly, inflation does not play a role in adjusting price indicators.
Where did the trouble come from?
Why is inflation occurring in Russia? And in any other country in the world? This is best explained by an economist who is well-versed in the nature of the phenomenon. Every product, service offered by one person to another has a certain price. We are used to thinking that the price of a product is low at first, but grows over time, but market realities run counter to this belief. When a manufacturer introduces new products to the public, the market is tested first. The entrepreneur determines some price parameters, which are then adjusted based on the interest of a wide clientele.
Since the inflation component is the depreciation of the national currency, after some time the funds that the entrepreneur initially requested for the goods become less significant. This leads to an increase in product prices. The process of depreciating money itself is provoked by a variety of reasons: analysts can immediately name at least two dozen. Some of them are more important, others play a lesser role.
Is money worth its weight in gold?
Inflation is growing in Russia and in other countries of the world, often because of the active issue of new banknotes. The ideal option is to make notes only to replace those that have become unusable. But in the manufacture of financial signs in larger numbers, problems gradually begin. The more money in the country, the less money the population has, however strange it may seem. More precisely, there are more banknotes, but you can buy less and less on them. Another factor provoking a worsening of the economic situation is devaluation. In relation to Russia, this means that the ruble is falling against other currencies with greater stability.
Important components of inflation include corruption. The larger, stronger the phenomenon, the greater the percentage of money stolen from the federal budget. According to experts, this is what explains such a high cost per square meter of real estate in the capital of our country. However, why only in the capital? Surprisingly, the fact is that housing in Miami costs about the same money as an apartment (in adequate condition) somewhere on the periphery of Russia, in one of the regional centers.
Economics and daily life
How are inflation and the standard of living of the population, any economist knows. The reciprocal relationship should not be surprising - the phenomenon under consideration determines how much you can buy for a certain amount of money, how much less you can buy with it over time. If a person has a fixed income, and the purchasing power of money decreases, the standard of living suffers.
The most sensitive layers of the population are students, pensioners, people with disabilities, that is, all those who receive a certain strictly limited amount from month to month. Inflation puts such people in a hopeless situation: in order to survive, you have to find ways of additional income, otherwise there is a high probability of falling into the abyss of poverty (and this is not an exaggeration). Both additional work and cost cutting to a minimum lead to a decrease in the quality of life, a decrease in opportunities. Additional problems are created by the complexity of employment for such groups of socially unprotected individuals.
A slightly lower level of inflation affects the lives of those whose income is not fixed. Others may even benefit from such a process. In the most favorable position are those who manage their own enterprises. If the price of products rises quickly, but raw materials rise in price more slowly, this difference goes directly to the budget of the company. Selling income is a significant plus, covering all expenses of the company, which leads to increased profits and better prospects.
How to survive?
Since the causes of inflation cannot be completely ruled out, which means that it will never be possible to cope with this phenomenon under the current economic, market, and monetary systems, you need to be able to maintain and increase available funds, using it to your advantage. If there is no way to turn the situation in your own direction, you must be able to minimize losses so that capital does not depreciate. The most successful method of prudent behavior is the accumulation of free funds. True, it is important to do it right. As mentioned above, inflation is closely related to depreciating currencies, so all that is accumulated should be stored in a reliable currency, or even several at once.
Professionals recommend saving at least five percent of each salary, or better, one tenth of the money received. They should be vetoed and not wasted under any pretext. Once the amount reaches a round mark, you can carry it to the bank for exchange for a more reliable, stable currency. The best option is to combine from three to four items. Promising are considered the money of America, England, Japan, the European Union. Even if one of the currencies falls in price, the losses will be relatively small.
See the root!
It is known that inflation is higher if the gold reserves of a power are at the same level, but there are more and more banknotes in circulation. Thus, each individual character reduces the amount of real reinforcement. In order not to encounter losses associated with such a process, you can start from the very beginning, namely to store all your savings directly in the precious metal. True, not in the form of jewelry - they are expensive, but when you try to sell such a product, you will be able to refund only a small percentage of the spent. Do not choose bullion, as the sale of such an object is taxed, no less than 18%.
The best option is to open a special bank account. A person who wants to bring money, which are converted into gold or, for example, platinum according to a special formula. At the same time, inflation growth will continue to affect a person’s daily life, but will not affect his savings. An anonymous metal deposit must be opened strictly in a reliable bank. At the time the deposit is closed, the bank will again recalculate the weight of the metal in a real amount, taking into account current prices. You will not have to pay taxes, inflation will not affect profits - in a word, you will be able to get all the advantages, retaining what you have gained and even increasing at the expense of bank interest.
Invest wisely
So that the inflation statistics for years do not scare so much, you can invest the accumulated funds in real estate. True, it is important to be able to choose everything so that the object does not lose value in the future. One of the promising ways - the acquisition of land intended for construction. True, this option is available only to those who have decent savings in need of preservation.
Types and formats
If we analyze the official inflation data, we will see what type of price increase is currently observed. Modern economic theory distinguishes two main classes - moderate, galloping. The first includes indicators within ten percent. Settlements are made for the calendar year. If you pick up data for different countries, it will become clear that in most powers the indicator is less than ten percent. On average, inflation in moderately developed countries is within four percent, while in developed countries it is 2% or even less.
Galloping is the situation where the inflation rate is estimated to be greater than 10%. In this situation, ordinary people have a very difficult time - the cost of production rises not even by hundreds of percent, but by thousands. If circumstances are very difficult, the only method of survival is to switch to barter. Hyperinflation is characteristic of a period of hostilities, a major, severe crisis. Within our country, the highest inflation rate known from economic history is 2,500%. This happened during the 1992 crisis.
Methods and Numbers
To estimate how high inflation is in a given time period, it is necessary to calculate the consumer price index. Choose from 700 or more types of services, products regularly consumed by the masses, rarely used and with an average level of frequency, and monitor how the cost parameter for all selected positions changes. In fact, this is a set of products necessary for the normal life of an average citizen or social unit - the family. Based on such a comparative analysis, it is possible to identify the progress of inflation, to what extent it is expressed.
There is an increase in inflation in conditions when monopolies gain more power than before. This is typical of a situation of reducing the share of small firms in the market, that is, weakening the competitiveness of the situation. Monopolies can afford to increase the cost of production, which leads to increased inflation. But the reason is not always this - sometimes sanctions, embargoes, and the influence of external partners play a role.
Distinguishing phenomena is important
Sometimes a rise in product prices is triggered by crop failure, weather events, and other external factors. In such a situation, the price of goods increases sharply due to demand exceeding supply. If in the next season deliveries increase in volume, the price drops - this is a normal process, adequate for a market economy, which has nothing to do with inflation.
Better less than more
The higher the inflation, the worse it is for the power economy as a whole. Such a change in the situation negatively affects the success of individual entrepreneurs, the welfare of citizens. If inflation is increasing, most prudent citizens try to invest the financial masses in reliable facilities - everyone understands that holding bills is categorically not profitable. Money is spent, valuable goods are acquired, the currency of other countries, the invisibility market is activated. But banking programs, deposits and loans lose their attractiveness, and these structures themselves - the clientele. When the banking sector suffers, the foundation of the power’s economic well-being is undermined.
Another feature of increased inflation is the unpredictability of the situation. In itself, the phenomenon has the property not only to move forward in jumps, but also to accelerate. Problems are growing like a snowball. It becomes categorically unprofitable for companies to enter credit programs, markets are losing stability. In such an environment, no one can plan for long-term prospects, which means that investment is turning into an almost forbidden (from the point of view of rationality) type of activity. This negatively affects the economy, prospects, opportunities, future of the state and all citizens.
I don’t want to change anything!
Another layman would consider that the best solution would be to freeze prices. A stable level, no changes, therefore, no inflation. Unfortunately, this does not work as we would like. Artificial control of the economy (usually by state authorities) has already been observed in the history of various powers. A good example is the period of the Soviet Union. In this case, an imbalance of demand and supply. In order for the economy of the state to be healthy, there were preconditions for development, it is important to control the value of the product through market mechanisms, and not power.
If the state takes measures to artificially control the value of the product, soon the population is faced with a shortage of goods and much becomes impossible to acquire. At the same time, quality drops sharply, as enterprises are forced to go to tricks and tricks in order to survive. Adapting to the governing power, entrepreneurs sacrifice the interests of the buyer, who cannot escape from the circumstances, because there is simply no alternative.
Optimal option
The most favorable scenario for the development of the economy of any power, including Russia, is a stable percentage of inflation that persists from year to year, but small enough not to affect the quality of life of the population. At the same time, the purchasing opportunities of the financial masses do not suffer; enterprises can plan their budget policy in the future. In such conditions, investment attracts many people, banking programs are actively developing, and the population is ready to save money, get involved in business, promote new projects without fear of unforeseen changes of tomorrow. Economic development is possible in the conditions when it is possible to make plans for the long term, therefore low stable inflation creates optimal conditions for business.
Many agree that for our country a four percent per annum would be a good indicator. About this, the industry would have the opportunity for development, banks would work with credit and debit programs, and the population would save money and borrow them from financial organizations without fear.
Under whose control?
The central bank of a country is an organization entrusted with the control of financial turnover within a power. In our country, its name is Bank of Russia. The financial structure has certain possibilities for adjusting monetary and debt policies, due to which inflation can be controlled to stabilize the situation.
Inflation targeting in Russia is one of the most practical tools of the Central Bank to bring real inflation indicators closer to the optimal 4%. Currently, measures are being taken to reduce the expected level of inflation, but their effectiveness is disputed by many.