Real Life Economy

How does inflation affect you?

Inflation became part of our reality, but how does it affect you? for many people the economic system we are living in, is part of the undoubted reality not to challenge. It is true that the complexity of the system make it hard to fully understand. As such, challenging its foundation look very hard. Which give the impression to many that taking the time to understand it is as a waste of time. Like many other aspects of our life, sometime it is the subjects that affect us the most that we choose to ignore.

While many people take their time to argue about politics, veganism, corruption and the complexity of life. Economics, is a topic many chose to ignore. Nevertheless, it is one of the most relevant and crucial aspect of any human living in the western society. In a different series of posts, I evolved a conversation about the concept of national debt (click here to read more about it). Our economical structure affect every aspect of our lives. It is reflected in our salary, the cost of living, our capacity to save money and the quality of our communal space. In my personal opinion there is 3 important topic that we, as a society, should understand, talk about and change. Those 3 subjects are: the national debt, the concentration of power by cooperation’s (click here to read more in the subject) and inflation. In this post I will concentrate in inflation.

How does inflation affect you

What inflation is all about? To make it simple, it is a contestant and systematic tool used by our government to devaluate our money. to make it even more simple, it is a rate that measure in  % the lost of your worth as a citizen yearly . This is why one of the first lessons  in economic class dictate that “a 100 euro today worth more that a 100% in a year from now”. It is true only thanks to inflation. What does that mean about you personally? it means that if you are earning the same wage for 5 years, while you’re getting the same number of money, it will worth less each year. Maybe, it can explain why life become harder and harder.

For the sake of understanding the gravity of the concept even better, lets get into numbers. You can find below some details about the inflation rate is Europe and the USA 🙁 https://tradingeconomics.com/euro-area/inflation-cpi  , https://tradingeconomics.com/united-states/inflation-cpi )

As you can see in the long term, inflation is a number that is constantly growing. According to the Bureau of Labor Statistics consumer price index, the dollar experienced an average inflation rate of 2.62% per year between 1985 to 2016. Prices in 2016 are 123.1% higher than prices in 1985. In other words, $100 in 1985 is equivalent in purchasing power to $223.05 in 2016, a difference of $123.05 over 31 years. It means your money lost more than 50% of its value in almost 30 years. At this point, if you believe this is true only in the USA, you are wrong. It is a world wife symptom of poverty.

If this is the case, why we read in our newspaper that inflation is good or necessary? in the reality, it is because it is true. Inflation is benefiting big cooperation’s and it is a necessity for the survival our governments. If you are following me for a while, I hope that you already understood that at our current times, the benefit of the government is many times opposed to the benefit of its people. In my next post in the subject, I will get more into why this is the case with inflation. For now, it is important for me that you understand the following point – Inflation is affecting the majority of the aspects of your life. It is one of the main tools used by our government to make sure the rich get richer while the poor stay poor. It is a tool that promise that we will work harder, get the same reward while getting poorer.

Share you thought with me in the comment section and express your opinion. Awareness and open conversation are the key for the creation of a better future.

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better world · Politics and Government · Real Life Economy

Are you ready for the next European economical crisis?

In the last decades, economical crisis’s has become part of our reality. Somehow, we are always surprise when it hit us. It is quite a remarkable fact, as we are allocating millions of dollars yearly to prevent and predict those events. In our current system, we have central bank, state institutions, economics and governments that are all supposedly in charge of making sure it will not happened. Nevertheless, it start to look like the next economical crisis is inevitable.

In the way I see it, those economical crisis should be categories as natural disasters. They happened fast, affecting the majority of the low and middle class drastically,  destroying the life of endless citizen and normally takes years of recover (if ever possible). My theory in the subject is that the big institutions, our governments and the rich are well aware of it way before it comes. Moreover, this layer of our society have the confidence that whatever come, they will be safe or saved. After all, bank and cooperation’s are saved by the government. In the worst case scenario, a specific company will bankrupt leaving  the rich with their riches, ready to move to their next investment. (just look at our recent history for countless real life proves).

It is unnecessary to mention, that the cost of saving this cooperation’s, banks and riches is payed years ahead by the low and middle class, in form of taxes under the justification of national debts or recession. It is a paradox, the people that get hit the harder by mistakes that are not theirs, are the one to pay for its consequences. The middles class lose their jobs, their saving disappear, their money devaluate itself together with their security, confidence and comfort. In this cases, the low class just becomes poorer which promise they will stay that way. 

the next European economical crisis

Now lets be smarter than we’ve been previously. We can learn from the past and prepare ourselves for the future. Does the next economical crisis is around the corner? The answer is yes and it is closer that you may think. In wonderful book called “Manias, Panics and Crashes” by Robert Z. Aliber and Charles P Kindleberger (Click for book review), a theory in the subject is presented. The book is showing that economical crisis’s never stop, they just move around the globe. We are unaware of it, as it will create panic. Which is exactly the same reason we are not aware of the crisis that is coming to hit us now. In the book, a few clear criteria are presented which appear before any economical crisis. I will lay them down and show the current European condition.

  1. An unreasonable increase in house prices is created – Based on publications, Eurozone house prices rise at the fastest rate in 11 years. House prices in the first quarter of 2018 were 4.5% higher than in the same quarter a year earlier. (Slovenia led the way with a 13.4% rise). Click her for the full article  
  2. An euphoria is created in the market between investors that shift to investments to the local market– recent publications had been showing that investors around the world are optimistic about the European market, ignoring the fact that the ECB  just slashed the European growth forecast.  Click here for article – Optimism article 1, 2, 3.
  3. A catalyst need to appear to create the burst of the crisis – There is many things that can evolve to be the catalyst that will launch the crisis. The Italian new government, the Bretix, trump new import/export reform (the “Trade war”) or just one the local big banks that can just collapse are all part of a long list. Just google the next European economical crisis and find endless article in the subject.

The bottom line is clear, the next economical crisis is around the corner. This time, Europe is even less prepare to handle with it than the last time, as it did not manage to recover yet. Moreover, the political fragility at the moment is not a good and comforting sign for the future in case I’m right. What can we do about? Well, at the moment not a lot. From the other side, when it comes we can demand that the solutions that will be implemented will demand the rich, bank and cooperation’s to take responsibility, for the sake of creating a better future for the middle and low class. After all, it is their doing and it should be their responsibility.

Share you thought with me in the comment section and express your opinion. Awareness and open conversation are the key for the creation of a better future.

If you like this content and would like to get more, Please like this post subscribe to this blog or to my Facebook. Your support is giving me motivation and helps me cause. For more topics in this blog click here.