Inflation can be terrifying. Not just for its destructive effect on the purchasing power of our currency, but for its destabilising effect on the national discourse.
Inflation in the United States just hit 5.4%. Guys, that’s a lot. As this graph shows, the US inflation rate is the highest it has been in 11 years.
Does 5.4% inflation sound high? It is. It means you would need to earn 5.4% interest on any money you have in the bank just to break even. Because as prices rise, the spending power of money falls. If a 5.4% rate of inflation was maintained, prices would double every 15 years. (e.g. a $5 box of cornflakes would cost $10 by 2036).
Inflation is generally seen as bad news for savers. Your nest egg can buy only half as much stuff if inflation doubles prices. And after all, buying stuff is what nest eggs are for. For people with debt — and that’s lots of us — inflation can be helpful, as it eventually makes the debt seem smaller. But it’s important to take into account interest rates.
Read more about the prospects for inflation in Australia…
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