Why High Inflation Should Worry Everyone, Specifically the Holidays
Why High Inflation Should Worry Everyone, Specifically The Holidays
For most people, the holidays are a time of joy, celebration, and spending time with family and friends. But for those who are worried about the state of the economy, high inflation rates can be a cause for concern – especially during the holiday season. In this article, we will explore how high levels of inflation can impact the Christmas holiday season. We will also provide tips on how to prepare for high levels of inflation during this time period.
What Is Inflation?
Inflation occurs when the value of a given currency goes up, which means prices go up. However, inflation doesn’t necessarily mean that the purchasing power of a dollar is decreasing. In fact, inflation allows the value of an existing dollar to increase. So inflation is a relationship between the value of a currency and the purchasing power of that currency.
If you want to know about what inflation is and how to avoid read our latest article here
Why Is Inflation a Problem?
There are a number of reasons why high inflation can be a problem. The problem with this are listed below:
It can cause prices to rise rapidly, making it difficult for people to afford basic necessities.
It can cause businesses to experience higher costs and reduced profits. This may lead to fewer job positions due to layoffs and income reductions as time goes on.
Inflation and Extended Holiday Spending Gap
Economic inflation is a strong contributing factor to the high inflation rate. Consumers in developed countries of the world are sitting on a debt bubble estimated to be over $60 trillion, and, in the last year especially, that bubble has begun to pop.
As consumers struggle to repay debt, they often cut back on spending. That can happen in two ways.
First, consumers can reduce average household spending by skipping a vacation or by buying less expensive vehicles or new furniture to fit their reduced budgets. Those who already spend income on vacations, fancy clothing, or nicer vehicles might even consider putting off taking a vacation or delaying an upgrade.
Second, individuals can only take so much of a financial hit when they borrow currency to pay high-interest debt. If they need to pay a higher fee for a certain loan because of an increase in rates, they might consider not using that loan ever again until the interest rates drop back.
Individuals and businesses who are paying higher fees because of rising interest rates can also put off hiring additional workers and begin clipping their spending in other areas.
Moreover, businesses that are funded by long-term debt typically have an income cushion in case the rate of inflation catches up and the cost of their debt increases. Because they're not as reliant on short-term financing, they may be able to withstand higher rates of inflation for a longer period of time.
However, government bonds, which are also issued with the approval of the U.S. government, are not subject to the same inflation risk as general debt. That's because the U.S. government can always increase taxes or cut back on spending if the inflation rate rises to a level that becomes a problem.
As a result, the U.S. government often has a higher percentage of its debt denominated in U.S. dollars than most other countries. That means it can afford to pay higher interest rates on its debt if inflation rates rise.
The federal reserve has been trying to stop higher prices this holiday shopping season with this higher cost. The grocery store shows to have high inflation with the food price. The cost of goods the increased but the federal reserve has been working on this to decrease this high inflation rate.
The Effects of High Inflation on Consumers
Inflation at a very high level can be very detrimental to businesses because they can end up expending a lot more currency on prices.
High inflation has been one of the factors that caused inflation. Most experts believe that inflation has affected prices increasingly over recent years, although they are concerned that it may be occurring at a faster pace.
As a result, people are concerned about the high inflation rate that will increase or decrease the value of their possessions in the future.
It is well known that during the Christmas holidays, families come together and celebrate. What is not so well-known is that high levels of inflation can disrupt these festivities.
For example, imagine you are planning on traveling to see your family for the holidays. However, with high levels of inflation, the cost of airfare, hotels, and other travel expenses may be more than you can afford. This can lead to a lot of stress and tension within the family.
What Should You Do About the Inflation at this Time of the Year?
Just like your favorite toys are going to get expensive in the coming months and years (2020-2050), the price of items affecting your life is also going to skyrocket. What this means for you, and your family is an increase in the cost of everyday items that you buy. People that prepare for the holiday season should be aware of this increase in the prices of goods and the potential consequences.
The fact of the matter is that grinches prevail during the holiday season.
Between the winter holidays and the winter holidays, there are all kinds of potential problems that people install into their Christmas lists.
To combat this, people often think of items they wouldn't ordinarily be interested in.
The best advice here is to match the holiday items with the needs and budget of someone you care about. The holiday shopper should avoid this stressful time by following some tips we share with you. The global perspective is that eventually, a low-interest rate is coming after this high inflation season. In addition, we will see what the federal government does as well.
It's better to get the expensive gift at the beginning or finish when everyone is excited, rather than ruining it by rattling off the expensive terms of your party.
In any case, there are no shortcuts when it comes to Christmas expenses. Unless you plan to sacrifice a big part of your income and budget for gifts for your family, you are just a mere victim.
It happens all the year outside of Christmas, and all year round.
Therefore, try to follow all your common sense when shopping.
Specific Strategies to Combat disinflation
The high inflation rate continues to hinder economic growth. This increase is compounded by the unpredictability that comes with it since it rises and falls for a variety of reasons. Adjusted for consumption, consumer prices rose 1.6% in December 2017. However, the Core PCE reading, a leading measure, was much higher at 3.3%. There is not enough evidence to tell whether this reaction will be temporary. However, there are indications that the reaction most likely will be reversed.
To combat this, the Fed has been working to increase inflation by slowly and steadily raising interest rates. 89 smaller rate increases have occurred since January 2015. Bringing the Fed's funds rate since it bottomed out at 1% in June 2013 all the way to 2.8%. Interest rates in the labor market, such as the Fed funds rate and mortgage rates, connect to those in the remaining markets and will influence them after adjusting for inflation.
If the Fed keeps the fed funds rate low and increases it slowly, this encourages price increase and discourages it.
If rates increase too quickly, the inflation rate will increase. This leads to negative effects including depreciating currency and drying up consumption.
As a result, traditionally low rates have been outpacing high rates causing inflation as it will happen with high inflation.
If you want to learn more on how to save and get your combat to disinflation.
Conclusion:
With prices running at the highest levels in a decade, the cost of gifts and holiday travel is likely to rise. You can tell the holiday season is coming when the price of everything rises. And for most shoppers, that's a frustrating part of the season, to say the least. The annual inflation rate has increased but that will not stop people from buying a holiday gift. This is not compared to the past year's interest rate. Let's hope this gets better soon. Enjoy this holiday and take our tips. This is not financial advice.
As we stated above, you know what to expect and how to move around it. Hope the articles help.
Are you ready for the holidays? Make sure you know how to move, save and enjoy the holiday season. Comment below and let us know
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