Inflation is indeed a term highly used during recessions. It stands for the uncontrollable increase in the price rate due to a high demand of services or goods. The unit of measure of this increase of prices is called the inflation rate.
Many economists, trying to explain this phenomenon, said that is looks like a vicious circle that without effective monetary policies cannot be broken. The consequence of the increased inflation rate is a decrease of the purchasing power. This means that even though people have the same sum of money, they can use it to purchase less goods or services than before. This results in the need of having more money. Once that happens, the demand increases again and prices are inflated.
All countries want to get rid of the high inflation rate. Some manage it by applying wise economic policies, while others seem to go deeper everyday. This was the case for example of Zimbabwe, which during 2003 and 2009 seemed to have lost control over things. It went through a process of hyperinflation and the rate was about a few million percentages.
The causes of such a damaging process are usually a multitude, that corroborated become stronger. For example, many economists say that a growth seen in the money supply is the starting point. Whenever governments print money without having the support of the real economic growth, prices of services and goods rise and get out of control. Other explanations could be the ineffective fiscal policies and the unsuccessful taxation and spending on the behalf of the government.
Multiple causes means multiple solutions. Using a monetary policy as a tool of control seems to be one of the solutions to control the inflation rate. This means that the central bank of the country takes decisions like increasing the interest rate and controlling printing money and the growth of currency supply.
Gold standard is another solution that was very popular in the past. The fact that the yellow metal has high face value, unlike the pieces of paper printed by the governments, turns gold into a good currency. Gold is a limited metal, so people cannot spend more than they have. This way the demand can be controlled and the inflation process stopped. Because of that investors understood that putting their money into precious metals can be very wise. They decided that buying gold can be a solution in times of economic crisis.
Many economists, trying to explain this phenomenon, said that is looks like a vicious circle that without effective monetary policies cannot be broken. The consequence of the increased inflation rate is a decrease of the purchasing power. This means that even though people have the same sum of money, they can use it to purchase less goods or services than before. This results in the need of having more money. Once that happens, the demand increases again and prices are inflated.
All countries want to get rid of the high inflation rate. Some manage it by applying wise economic policies, while others seem to go deeper everyday. This was the case for example of Zimbabwe, which during 2003 and 2009 seemed to have lost control over things. It went through a process of hyperinflation and the rate was about a few million percentages.
The causes of such a damaging process are usually a multitude, that corroborated become stronger. For example, many economists say that a growth seen in the money supply is the starting point. Whenever governments print money without having the support of the real economic growth, prices of services and goods rise and get out of control. Other explanations could be the ineffective fiscal policies and the unsuccessful taxation and spending on the behalf of the government.
Multiple causes means multiple solutions. Using a monetary policy as a tool of control seems to be one of the solutions to control the inflation rate. This means that the central bank of the country takes decisions like increasing the interest rate and controlling printing money and the growth of currency supply.
Gold standard is another solution that was very popular in the past. The fact that the yellow metal has high face value, unlike the pieces of paper printed by the governments, turns gold into a good currency. Gold is a limited metal, so people cannot spend more than they have. This way the demand can be controlled and the inflation process stopped. Because of that investors understood that putting their money into precious metals can be very wise. They decided that buying gold can be a solution in times of economic crisis.
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Recession is the period when you need to learn from professionals how to Buy Gold Bullion.
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