Inflation Is A Problem For All Of The World Economies

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Nav 101.
Research paper
Daniyal Shaikh
Inflation
Inflation has been a problem for all of the world economies for many years causing a great deal of damage to stakeholders. Inflation is an increase in the general level of prices for goods and services. It is measured as an annual percentage increase. As inflation rises, every dollar you own buys a smaller percentage of a good or service. As a result of inflation, the purchasing power of a unit of currency falls. For example, if the inflation rate is 2%, then a soft drink that costs $1 in a given year will cost $1.02 the next year. As goods and services require more money to purchase, the implicit value of that money falls. (Investopedia)
Few currencies are fully backed by gold or silver.
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Similar situations have occurred in Peru in 1990 and Zimbabwe in 2007-2008. (Investopedia)
Inflation not only means the decrease in the value of money but it could also mean the increasing prices of essentials such as wheat, milk, meat, clothing, medical services, coffee, electricity, etc. Inflation has two major effects, The effect of inflation on savers and investors who lose purchasing power. Even if they have buried their money in the safest bank in the world, it is becoming less valuable with the passage of time, the other effect of inflation is positive because debtors can pay their debts with money that is less valuable. They will be watching their debt get paid off each year, totally free. (Joshua Kennon)
Price inflation has immense effect on the Time Value of Money(TIPS). This acts as a principal component of the rates of interest, which forms the basis of all calculations. The real or estimated changes occurring in the rates of inflation lead to changes in the rates of interest as well. Inflation exerts impact on the treasury of a nation as well. In United States of America, Treasury Inflation-protected Securities (TIPS) ensures safety to the American government, assuring the public that they will get back their money. However, the rates of interest charged by TIPS are less compared to the standard Treasury notes. The most immediate effect of inflation is the decrease in the purchasing power of dollar
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