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Inflation




Phenomenon during which the purchase power of currency decreases, while its volume increases.

Inflation drags along an increase of prices as well.

With the purchase power of the currency decreasing, sometimes larger digit-bearing banknotes are required to be printed.

All healthy and prosperous national economies require an adequate level of inflation. The simplest explanation is: as GDP grows, as a country's economy expands, more money needs to be printed.
Too high inflation hurts economies and can be a factor that increases poverty.

The rate of inflation is not the only key factor here, but also the speed of the process. If money is inflated rapidly (as during economic crisis), then it creates a severe economic crash, not to mention social crisis - prices soar, wages plummet, potential social unrest, food and fuel insufficiency, healthcare crisis etc.

Some countries resort to monetary easing (called "quantitative easing" in the United States) in order to stimulate their economy. This literally means more money creation. However, in the modern World, quite rarely is money physically produced (like banknote printing), it is rather digitally-generated through the banking system. The effects are the same: inflation.

Inflation is not always admitted by the central banks. Also: some products or services might have more inflated prices than others. A good example is - food price inflation.
Currently, many countries are witnessing high food price inflation. But this does not reflect in the overall official figure of inflation.

The extreme high level inflation is called hyperinflation. And this is exactly what is expected to happen during the next few years with the EU's and the USA's economy. Below you can see a depiction of where this can lead...





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