Why Inflation is Our Enemy

Inflation describes rising prices. It cocurs when people spend more for the same amount of goods and services than they did a year ago.

When you and everyone else pays more and gets less for it, it can have devastating effects on the economy - and some people get hurt more than others.

“In every economic environment, there are winners and losers and inflation is no exception.?However, the longer high inflation persists, the harder it is to find winners,” says the chief economist of Robertson Stephens, a San Francisco financial advisor. “Ultimately, high inflation seeps into the nooks and crannies of every balance sheet and income statement.”

Here are some reasons inflation can be so devastating to everybody’s bank accounts.

3 Ways Inflation Hurts Consumers and the Economy

1. Less Purchasing Power

The most obvious impact of inflation is that it hurts your purchasing power. If you can’t buy as many goods and services as you did before inflation, your quality of living will eventually diminish. Essentials will take precedence over non-essentials as everyone tries to stretch the purchase side of their budget. Less purchasing power really hurts families that were?already experiencing financial hardship. Inflation hits the lowest-income families harder because items such as fuel and food make up a much larger portion of their budgets, leaving less for discretionary spending. And if you’re already stretching your budget to the limit, it’s harder to make adjustments to reduce your costs. For instance, if you’re already using the cheapest toilet paper or paper towels on the shelf, you can’t trade down.

2. Less Savings

If rising prices for essentials is eating into your budget more than normal, you probably aren’t putting as much money into a savings account. In the USA, a June 2022 Forbes Advisor-Ipsos survey found that?42% of respondents were saving less money than usual. And even if you have money in savings already, that decreased purchasing power means your emergency fund might not stretch enough to cover a financial crisis during an inflationary period.

3. Loss of Goods and Services

Some industries do well during inflationary times, particularly ones in which you can’t hold off your spending indefinitely, like supermarkets, service stations and funerals - but some businesses are completely devastated. That’s because when inflation runs rampant, consumers spend their money on products and services that they absolutely need, and hold back on what they don’t.

Income Generation

This is why, for those who can afford it, investing into income generating products is so important; and if these are in a hard currency such as USD, Pounds or Euros, even better.

Caravel Partners has access to a whole range of hard currency income generating assets, from offshore USD bonds to UK, UAE and European property.

Talk to us. [email protected]