Inflation (1 Viewer)

Vultra_

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Not doing economics for my hsc but I am wondering why people don't keep the absurd amounts of money lying about during inflation and wait for it to end, they'll be rich as @#@#@. (Doing economics in commerce right now)
 

#RoadTo31Atar

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Inflation is the rise of prices, if you have 100k stashed under your mattress it will still be 100k but it will have less purchasing power because everything else is now more expensive.
 

blyatman

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Money is not meant to hoarded, it is meant to be invested. A healthy economy is one in which there is continuous flow of capital circulating around. If nobody bought things or invested their money, there would be no new jobs/businesses being created, and the economy would stagnate. This is why zero inflation (and even deflation) is bad - it encourages hoarding. Thus, inflation encourages people to invest and actually spending your money, because in the future the purchasing power of their money will be lower.

100 years ago, $100 was a huge amount of money - it might buy you several houses and a huge amount of land. Imagine you kept it and did nothing like you suggest for 100 years. That $100 today isn't even enough to pay for rent. Had you invested that $100, it might've kept its relative purchasing power.

People generally only have about 10-30% of their assets as liquid cash as a safety net. Most of your money is meant to be invested and put to good use, not stored in your savings account.

If you look at zimbabwe or venezeula, the hyperflation there is so bad that if you don't spend your money immediately, it becomes worthless in a few days time. So they won't be "rich as @#@#@", they'll actually be poor as @#@#@.
 
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brent012

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For completeness, there's also been ideas thrown around recently about removing or discouraging cash.

In that event, a lot of the conventional economic wisdom discussed above gets thrown away as it removes the ~0% floor on interest rates and could ban hoarding of money outside of the financial system + incentivise spending with potentially deeply negative interest rates. Interesting stuff, but possibly most sources about it online are quite alarmist.

 

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