Thread by @FinFloww

What causes an increase in inflation. A thread 🧵

You know that investing in the stock market is important to beat inflation, but have you ever wondered why does everything become more expensive over time?

Let's understand this in a very easy way.

Inflation is basically when you have to pay more money for the same value you’re getting .

Meaning either the price of the goods increases (production and supply) or the value of the exchange unit, i.e. the currency decreases.

To understand this better let’s talk about the current situation.

Central banks of major countries stimulated the demand by printing more money.

When people have more money, or there’s ample liquidity, people start buying things with it. That’s how demand is stimulated.

You need to understand that the goods generated by a country of a certain value remain the same.

So, if you try to distribute that value among the people of the country, that value doesn’t increase.

So, if a country prints more money and distributes it, it actually reduces the value of the currency.

If a central bank prints more money, it enables the commoners to increase the demand of the goods.

Now the producers get a good opportunity to exploit the people by raising the prices of common goods.

Now this leads to inflation as we discussed earlier. Because you have to pay more price for the same good.

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