What can I do, as an individual, to fight inflation?
Inflation refers to a rise in the cost of goods and services. Inflation usually happens for one of two reasons.
First, inflation can happen because there is more money circulating in the economy. When money is more common its value declines slightly. Since more money is slowly being introduced (usually in the form of loans) into our economy on a regular basis, the value of each dollar drops slightly over time. As the value of each dollar slowly declines, prices rise a little to match. This is why common items like milk, bread, chocolate bars, sodas, and so on cost slightly more now than they did five years ago.
The other cause for inflated prices is how hard it is to purchase goods and services. Basically, the more rare or hard to get an item is, the higher its price tends to rise. As an example, normally car dealerships have lots of cars on their lots, ready to go. This keeps the cost of buying a car relatively low. However, if the factory building cars closes down then the dealership won’t get any new cars. People still want to buy cars, but there are fewer cars to go around. In this situation the dealership raises prices so remaining cars cost more. If a new dealership with lots of cars opens across the street, the old dealership will need to lower its prices to compete because suddenly cars are much more readily available.
In summary: inflation happens when there is more money circulating in the economy or when goods and services become harder to acquire. When more money has been introduced into the economy – perhaps through tax credits, new high-paying jobs in a region, or government programs – then the flow of money increases in the economy. When there are supply line disruptions, certain items become popular, or people need a scarce resource then demand increases. Either or both of these things (more money or scarce goods) can cause inflation.
On a large scale, inflation is typically fought by trying to slow the flow of money into the economy – possibly by raising interest rates, increasing taxes, or reducing government spending. It might also be fought by trying to increase the supply of goods and services. This could be done by opening new businesses, signing trade deals to open new trade routes, or lowering tariffs on imports.
On a personal level can you do anything to fight inflation? Sort of. You can fight society-wide inflation in the same way a single ant can provide food for its colony or a grain of sand helps make a beach. It’s a very small contribution, but one which can help if your approach catches on and almost everyone is participating.
How can you fight inflation? Mostly by not buying things, or at least not things which are going up in price. Is the cost of fuel rising? You can travel less. Is there a chocolate shortage driving up the price of candy? Buy fewer chocolates. Is the price of automobiles going up? Try to make your car run longer before you upgrade. See what items you can cut back on or downsize. The fewer purchases you make, especially of items rising in price, the less demand there will be for those items. As demand lowers, the price tends to follow.
Your contributions might not make a noticeable difference, you probably won’t see any prices change, even if you and everyone in the neighbourhood cuts back on in-demand items. However, there is a fringe benefit. When you’re buying fewer things that are in demand you’re saving money which means, even if you aren’t stopping inflation you’re less affected by it.
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