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Rising food prices are a harmful result of inflation. Can you use crypto to protect your pocketbook?gettyInflation is the systematic erosion of the purchasing power of money. Governments and central banks often attribute inflation to supply shocks, rising production costs or geopolitical instability. These factors may drive temporary fluctuations in inflation under specific circumstances, but they all stem from a deeper, underlying cause: the relentless expansion of the money supply.
Persistent inflation occurs when the growth of the money supply outpaces economic output, reducing the purchasing power of each dollar. In simple terms, when more dollars are printed, each dollar buys less.
Fiat currencies like the dollar are vulnerable to inflation because governments can create money at will, and often do so for political expediency. Even in times of economic stability, central banks deliberately try to balance inflation at a rate of 2% annually. This figure traces back to a short-lived policy adopted by the Central Bank of New Zealand in 1989. Somehow it took hold, and the entirely arbitrary 2% target has since been enshrined as economic orthodoxy.
The stated reason that 2% inflation is desirable is because it “spurs growth,” though no clear mechanism for how inflation drives economic expansion has been ide …
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