Erich K Squire Discusses What You Need to Know About Inflation

Inflation is a common topic of conversation lately, but financial expert Erich Squire believes it can be misunderstood. The definition of inflation is simply a rise in prices, but the concept is much deeper than that.

What Is Inflation?

Inflation means that the price of products rises, reducing the power of the dollar or another currency over time. A unit of money can purchase less than previously due to inflation. This is also known as reduced purchasing power.

What Causes Inflation?

Inflation can be caused by a variety of factors, including legally devaluing a certain currency, increasing the amount of money in circulation, or through the purchase of government bonds via the banking system. All these methods cause money to lose its value, thus decreasing its purchasing power.

Three Types of Inflation

The definition of inflation is simple, but the entire concept can be difficult to understand, as there are several different types of inflation.

Demand-Pull Inflation

Demand-pull inflation takes place when the supply of credit or money creates an increased demand for products. The demand increases so quickly that the economy can not produce products quickly enough.

Finance executive Erich Squire explained that higher spending results in higher demand and ultimately higher prices.

Cost-Push Inflation

Cost-push inflation occurs when the money supply increases it causes prices to increase too. For example, when oil prices increase, the cost of energy rises, causing the price of products to rise.

Built-In Inflation

Built-in inflation occurs when people expect the rate of inflation to continue rising. They see a rise in the cost of products and demand higher wages to be able to pay for such items. The increase in wages results in an even higher cost of goods, and built-in inflation continues.

Pros and Cons of Inflation

Generally, people view inflation as a bad thing because prices are higher. However, that’s not always the case. Inflation can also result in higher home prices, increased wages, and a boost in economic activity.

The downfalls of inflation involve rising prices. People become uncertain about the future and are not always compensated correctly for such increases. Wages should undoubtedly increase as inflation rises, but unfortunately, that’s not the case for everyone. Inflation can significantly impact a person’s standard of living.

Finance Executive Erich K Squire and Inflation Control

Mr. Squire explained that countries must have financial regulations in place to keep inflation from rising at an unreasonable rate. Formerly, United States policymakers kept inflation at a rate of 2 percent per year or lower. However, inflation has risen at a rapid rate in the past year, presenting a critical issue for the country and the world.