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Originally Posted by boefixepa
Okay, here's how I keep it straight in my head and try not to get headaches.
I look at the vaule of the goods. The dollar amounts/pay amounts are just used as a comparison figure, that's why money was invented in the first place.
If the value of my work/earnings gets me the same 'stuff' then there is no inflation.
If I have to work two hours to get the same 'stuff' then yeah, inflation has happened.
I've seen gold used as a base line too. An ouce of gold will get you the same goods today (in the comparison I've read 'a good men's suite') as it did 'XX' amount of years ago.
Money, currency exchanges, stock markets, intrest rates, inflation, past vaule of money, future value of money, supply, demand, macro vs. micro economics, all those nice 'economic terms' are great. However, they complicate things like no other. Not to mention all the different theories out there about how things work. I feel a vast majority of it is just propaganda anyway. They tell us what they want us to believe. (By the way, the world is NOT going to run out of oil.)
I like to bring it back to simple concepts that are easier for me to work with. I have a very limited control of things when I look at the big picture. Somehow I don't think Bush is going to impliment my personal budgeting ideas. (Wouldn't it be nice.) So I have to work with the situation I have been give. No matter what I do I personally CAN NOT control inflation. Trying to understand it in detail is going to give me a headache. So where does that leave me.....
1. Make sure any savings are out pacing inflation so that my buying power does not decrease.
2. Do my best to make sure my wages increase as fast if not faster (yeah right) than inflation.
3. IF I can not do #1 transfer my savings into commidities that are not as effected by inflation. (IE property, gold, and I'm sure there are more, but those are the easy ones.)
4. Make sure I have planned the best I can to be affected by inflation as little as possible. - A good example of this would be knowing when and when not to purchase items especially big ticket items and knowing when to buy because inflation in likely to happen and having enough money to do so.
Okay I'll think I'll stop now, hopefully you get the idea of what I'm saying.
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Thats a pretty good way to get the jyst of it.
The way I break it down is even more simpler. Inflation is the artificial decline of money value to ballance the true value of the countries assets.
If you use that simple definition, it all makes sence, but the reasons behind it will never be a simple explaination due to everything being a massive domino effect with infinate influences.