Lesson Plan For The Future

Inflation…

We just experienced the second month with inflation above 8%. The Federal Reserve’s Inflation Target has been 2% for years.

Inflation is a “hidden tax.” Your hard earned dollars buy you less…Dollars are worth less (worthless if we are not careful).

Causes of Inflation:

• Too much money chasing too few goods.

• Increases in the Money Supply without corresponding increases in goods and service.

• Too much buying power without enough to buy.

Buckle up because there is more to come.

Remedy:

Decrease purchasing power, which means making credit more restrictive…increasing interest rates.

Results:

• Usually, real estate fares well during periods of inflation.

• Social Security Cost of Living Adjustments (COLA) are greater.

• Fixed income seniors living on the interest from their savings benefit.

• Allows people and governments to pay off debts with “cheaper dollars.”

“We’re in a period now where this is much more of a narrative battle than a policy battle,” said Bill Galston, chair of the Brookings Institution’s governance studies program and a former domestic policy aide to then-President Clinton.

“The sad fact is that, aside from actions by the Federal Reserve board, there is relatively little that policy can do in the short term to affect the inflation numbers very much,” he added.