Why is inflation so high? As the United States Consumer Price Index rose 6.8% in 2021, it leaves economists needing to look further into the root cause of the change. Inflation can be defined as an increase in the price of goods or services due to the weakening of currency, usually caused by a surge in product demand, an increase in production cost, supply chain breakdowns, and changing house prices. Professionals measure and study inflation using the consumer price index (CPI) which monitors different goods like medicine, recreation, clothing, food, housing, and much more. While the Federal Reserve aims to keep inflation at 2% or less, rates are higher than ever and have made the biggest jump in over thirty years.
There have been many instances throughout United States history where we have seen drastic fluctuations because of inflation. For example, the highest inflation rate of 29.79% in 1778, the rise of over 14% during the Great Stagflation, and the Great Recession in 2008. Currently in 2021, prices of everyday goods such as used cars, food, healthcare, clothing, energy, and more are 15.53 times higher than the average price in 1921.
Despite these steep inclines in prices and inflation levels, the United States has three main methods to control runaway inflation. Reducing the amount of money in circulation, decreasing bond prices, and increasing interest rates through the central bank are all ways that inflation can be kept under control. However, in the last 100 years, the United States has experienced more than nineteen recessions, and some of those regulating strategies can induce recessions, decrease spending power, and create job loss.
Although inflation is an ongoing process and is constantly fluctuating within the American economy, there are many ways to protect oneself from its effects. Investing in stocks, purchasing property, increasing education on earning potential, and raising retirement contributions are all actions that can help to ease the stress and strain of the current economy on one’s personal finances. Inflation is coming, are you ready to protect your finances?
20 million American adults could rise into scorable credit tiers, by engaging alternative data such as rent bill history and utility payments, to make a monumental difference.
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via expensivity.com
