Stagflation is characterized by the presence of inflation, stagnant or modest economic growth, and relatively high unemployment. Global economic policies try to avoid stagnation, since they strongly affect the quality of life of citizens, but also the economies of countries. High unemployment has severely slowed down economic growth, so its growth rate cannot exceed 1%. To understand stagflation, you need to understand the term «inflation» and how inflation affects everyday life and the economy. If you are wondering what stagflation means and how to keep your money safe so as not to risk losing value over time, we have prepared some useful ideas for you:
1. Stagflation vs inflation stagflation
2. How to prevent currency depreciation during stagflation?
1. Stagflation vs inflation stagflation
Inflation is the rate at which the price of goods and services in an economy increases. It is a natural phenomenon, which can be managed effectively and which is expected by the world’s economists and politicians, and not a spontaneous occurrence. Typically, the inflation rate is calculated for specific time periods, ranging from years to decades. These are the most common causes of inflation:
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- Demand is growing faster than production can meet. When consumers want to buy more than is already on the market, producers can often be overwhelmed. Thus, inflation appears, more precisely the rise in prices, to regulate the increase in demand.
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- Increase in production prices. When the cost of producing goods or services increases, prices also increase.
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- The increase in the cost of living. When prices go up, the cost of living goes up too. This leads to the need to increase the wages of workers, who will need more money to cover their daily expenses. As in a domino, the increase in wages will cause an increase in the final prices of products and services.
Stagflation is an economy with inflation but slow or stagnant economic growth and high unemployment. If inflation only affects the prices of goods and services, stagflation also affects employment and is even more detrimental to economic stability. This situation is unnatural and should be avoided at all costs. The reasons can vary, but some of the most common reasons include draconian economic measures by governments and an ever increasing money supply. Fortunately, economists don’t think stagflation will happen again in the modern economy, which means the risk of it happening is low.
2. How can currency devaluation be prevented in stagflation?
In both stagflation and inflation, money loses value. There are a number of solutions you can use to ensure that your money doesn’t lose value and that your savings work for you. The most accessible solution of this type is investment. You can start investing small amounts with the help of a broker or by learning yourself. Investments can be of many types, from land and real estate to shares in companies or mutual funds. When you choose to diversify and invest wisely, not only will the value of your money not depreciate, but you also have the potential for profit. When it comes to investing, a small or large amount of money per month is enough, and if you want to start with a moderate amount, you can apply for an advertisement loan or a phone loan that can be obtained quickly.
Stagflation is an unnatural and unwanted condition in an economy because it negatively affects the standard of living and the cost of living. High inflation, high unemployment and stagnant economic growth define stagflation and make it one of the most undesirable situations from an economic point of view, and all governments and economic authorities want to avoid it. Fortunately, the chances of this happening are low because economic policy has advanced a lot in recent years, emphasizing quality of life and laws that favor the population and producers or service providers.