The causes for inflation

Currently, everyone is talking about inflation, media, friends, the state, central banks and many more. But most do not know what are the causes for inflation. Therefore, we discuss this topic in this blog post.

Money supply expansion

Money supply expansion is probably one of the main reasons for high inflation. As you can observe, in the last two years, most central banks worldwide have printed money to support people who were no longer allowed to work. The big problem is that a lot of money has been put into circulation, and the same or even fewer products and services are available, which leads to rapidly increasing prices.

Money supply expansion in the last ten years

Limited supply

Another driver of inflation is a limited supply. In the last two years, companies have been temporarily closed, and supply chains have been disrupted by various factors, resulting in fewer products on offer, leading to more being paid for them and prices rising.

Rising costs for companies

The next factor for inflation is rising costs for companies. Mainly due to geopolitical conflicts, raw materials have risen very sharply in price, leading to companies having to raise their prices to cover their costs, which of course, also leads to higher inflation.

Depreciating domestic currency

A depreciating domestic currency also has an effect on inflation. If the purchasing power of a currency decreases compared to other currencies, other countries import products from this country due to the favorable exchange rate, which in turn leads to a lack of products in the country with the weaker currency, and thus the prices for products increase.

Policy measures

The final point for today’s topic is policy measures. These can also be a driver for inflation. If politicians introduce tax subsidies for certain products, high demand can arise quickly, and this increased demand then meets with too little supply, causing prices to rise again. Tax cuts for citizens can also drive up inflation because they have more money available for consumption, which leads to higher demand, and we know what happens next.

As you can see, many factors lead to rising inflation and lowering purchasing power. That’s why it is essential to position yourself correctly, and that’s where JAVLIS can help you because, with a current 20% return per year, you beat inflation and earn a little extra.

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