Inflation in the United States of America has hit a four-decade high this time which is a massive record during the COVID pandemic. Unfortunately, the lower-income group has suffered the most. Let’s not go to the homeless people in Skid Row in Los Angeles who are nowhere near buying below-the-normal kinds of stuff to survive this massive inflation.
Only a few know that printing money affects the economy negatively. Some even say that printing money is made in Devil’s Workshop. An economy is surging in inflation, and printing more and more notes can be lethal for the country itself. Middle and lower-class households are facing the worst of the crisis now in the US.
History repeats itself:
Every time a country has tried to print more and more notes, it has faced disastrous consequences in the past. The greatest example goes back to the 1920s when the Weimer Government in Germany printed notes of over 500 billion and caused massive inflation in the market.
Not many will forget the disastrous conditions of Germany back in 1923. That year was the year of doom for the country as the great inflation reached its peak, making people almost out of food and necessary items! Well, the German government beat the crisis and the uncountable strikes around the country by printing more and more cash notes.
It caused more harm than solving the problem:
The printing of notes became a necessity for the German economy due to the high payment to the strikers of the Ruhr. However, the printing of more and more notes was more like a tornado. Millions and millions of notes were created to beat inflation.
But, the results became worse, whatever may be the number on the notes, it meant nothing in comparison to beating inflation. The whole plan of beating the huge surge of inflation turned out to be worthless.
Venezuela suffered the same fate:
Venezuela faced the same fate in 2020 with printing notes which caused inflation of 3500 percent. However, in 2021 the surge reduced but cost a heavy amount to the country. In May 2020, the inflation surge was upto 3700 percent. It was crazy as raining burning notes from hell on the Earth.
Venezuela became next to nothing after the massive inflation surge causing the prices to shoot up faster than a rocket. The pathetic conditions of the people out there were due to the prices which were doubling every few weeks, causing massive troubles for commoners.
It’s the same thing happening with the USA:
The sudden inflation in the USA is due to the rapid printing of notes worth three trillion dollars in three and a half months. Needless to say, the inflation rate was 8.6% in May 2020 which was the highest in the history of the US economy in the last four decades.
Nevertheless, the most surprising factor was that with this much printing of notes, other countries were almost drowning in the inflation surge. Usually, the logic goes that the same amount of goods exist in the US economy, however, if the number of notes increases, it doubles the prices of goods.
So, it is festering the burning wound of inflation more than creating a solution. More and more infusion of cash into the US economy gave the red signal that inflation will be all-time high this time. The influx of cash into the financial system has raised more concerns than usual.
The surprising factor:
But, the USA faced only a nine percent inflation surge, concerning other countries that were almost on the verge of exploding due to hyperinflation. The most dangerous factor was that the inflation spread to other countries due to the surge of printing notes in the USA. As a result, there is a cost of living crisis, with Britain’s inflation hitting nine percent.
Flooding the financial system:
This continued flooding of the system with more than enough money has led to the shaking of the world economy. However, the inflation in the US had a reverse effect on the global economy itself.
Global inflation rate:
Canada’s inflation hit 6.8 percent, India’s wholesale inflation hit 15.8 percent, whereas the USA’s inflation hit only 8.5 percent – the lowest of the whole world. You can say the inflation in the USA got exported to other countries through various modes. Thus, affecting the global economy in a very notorious way.
The inflation in India, which we are facing right now, is partially due to the money printed in the USA in 2020. Now economists worldwide are blaming the US dollar for having some secret magical wizarding powers that affect all the currencies worldwide. The critical condition of the global economy is directly proportional to the printed US Dollars in 2020.
Quantitative Easing:
In the USA, the Federal Reserve lends notes to the Bank of America, which in turn gets spread out among Americans through various loans. Now, hypothetically if the Federal Reserve Bank charges an interest rate of 6.15% to the Bank of America. The Bank of America will have to charge an interest percentage of 8.15 percent and make a two percent profit.
Now if inflation hits the economy, the Federal Reserve will have to increase the interest rates from 6.15 to 6.25 percent, which in turn will increase the interest rates provided by Bank of America. So, hypothetically considering, they will increase it from 8.15 to 8.25 percent over loans. As a result, this major shift in the interest rates due to inflation is significant enough to affect the market and people worldwide.
So, as inflation hits high, the EMI against the loans will also increase significantly. As a result, the savings of the common people will reduce rapidly as their income is not going to increase with the surge in inflation. This certain reduction in savings will cause the common people to cut their costs of living. Thus, making their daily living meager and meager. Now, this whole procedure is taking place not just in the USA but all around the world.
