6 Dangers From A Prolonged Period Of Inflation!

 

We have seen a wide range of economic events and circumstances throughout history, including recession, inflation, and everything in between! For a few years, we had very low inflation, which was partly caused by a number of global situations, and was largely interrupted by the ramifications and repercussions of this awful pandemic! Currently, we appear to be experiencing a significant amount of inflation, which has been caused by a variety of factors, including, but not limited to: post-pandemic ramifications; Supply and Demand issues, which have been caused, in large part, by supply-chain issues; maintaining, unrealistically - low, near-record - low, interest rates, and so on. With that in mind, this post will seek to explore, consider, review, and explain six potential hazards associated with protracted periods of inflation, as well as why it is critical to be aware of and grasp options and alternatives in order to choose the best - path - forward!

1. Cost of Living: Earnings (and wage growth); prices, etc., and how wages are able, or not able, to keep - up, with the increase in costs, etc., are some of the elements that determine the Cost of Living! Most people are aware that, in the last few months, there has been a significant increase in pricing, most notably in grocery stores, restaurants, and practically everything else relevant to day-to-day existence!

2. Federal Reserve: In recent times, the near-historically low, extended period of interest rates has generated a Real Estate, Sellers Market, and a big spike in housing values, in most regions of the country, in addition to the intended measures (supporting businesses, and the economy, in tough - times). Furthermore, it resulted in an increase in consumer credit usage because borrowing became less expensive! However, most economists predict that many of these subsidies, which have kept interest rates low, will be gradually reduced (or eliminated) starting next year. What effect will this have, and will we see the same reaction as in the past, when rates rise, inflation falls, and so on?

3. National economy/conditions: Many companies have faced issues in terms of obtaining sufficient amounts of needed resources, etc., owing to a global supply chain set of obstacles/ challenges. You can go into almost any store and find more - barren - shelves than we've seen in recent memory! Furthermore, construction materials, products, food, toys, automobiles and automobile parts, among other things, are under Severe stress as a result of this!

4. Global economies/economic conditions: Almost every country is dealing with economic concerns and challenges! The United Kingdom has been substantially impacted by global as well as unique national trends, causes, and situations! Because we mostly live in a global economy, every disruption in the supply chain has an impact on everyone!

5. Stock and Bond Markets: The United States Stock Market has profited tremendously and experienced considerable rises in the price of equities due to a variety of reasons/factors. Aside from the obvious reasons, many investors assumed that stocks were the only game in town because interest rates were so cheap! Bond rates will climb if interest rates rise, and existing bond prices will adjust and fall!

6. Immediate, intermediate, and long-term consequences/impacts: Inflation's immediate impact is usually rising prices and salaries, which usually rise at a far slower rate! We begin to witness declining economic patterns in the intermediate-term, and in the long-term, depending on how long it continues, there are sometimes many, unfavourable repercussions and impacts!

Don't take inflation - and the hazards it entails - for granted! You will be better prepared if you know and comprehend more!