Double Edged
Inflation is often viewed as negative and the entire premise of the concept is that it reduces the value and in turn the strength of hard-earned money. During March of this year, we saw how the prices of everyday items rose a massive 8.5%, the highest level since the Reagan administration. Not only did this inflation hurt investors and participants in the economy, but it ate away at the value of capital and investments. Inflation could also make future company profits less valuable today and lead to higher interest rates.
So, what are the pros of inflation? Well, for the two-thirds of Americans that own a home, the value of that home might just finally exceed $400,000 for the first time (a near 15% gain from where most housing was a year ago).
Beyond housing, some people’s pay has outpaced inflation, with workers in leisure and hospitality (such as restaurants, bars, and hotels) seeing their hourly earnings grow 10.2% in the year through June, according to U.S. Department of Labor data, about 1 percentage point above the inflation rate. Even so, inflation is harming more people than helping. Most of all, inflation has kept increasing throughout this summer, with June seeing some of the highest numbers of the past few months.
What do you think about inflation right now and are you personally seeing any of its benefits?
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.
