Nowadays, rising prices have become a topic of discussion in the streets. The rising prices of vegetables, grain, energy and other commodities have made many people feel that the money in their pockets is worthless. The milk and bread in the supermarket have quietly increased in price, and the food that is unwilling to increase in price is "slimming"; Soaring oil prices make your car a "bottomless pit" for attracting gold; Those families with fixed wages or fixed pensions find it increasingly difficult to maintain their original living standards; Citizens saving in banks are beginning to worry that their savings will even shrink. Economists generally believe that this large-scale price increase indicates that we are welcoming a global "inflation".

Inflation refers to the gradual depreciation of a certain currency form. The reason mainly involves two aspects: people's cognition of value and the principle of supply and demand economy. This effect leads to inflation by directly affecting the value of money. When the currency is still the gold standard, inflation usually happens if people start to worry that the government or banks can't convert their cash into gold. If 1 USD is now worth 28.4 grams of gold, but people think that the government can only exchange 14.2 grams of gold for 1 USD, then USD will start trading with the value of 14.2 grams of gold. The value of money is based on our cognition of the value of money. If we understand how cognition affects the specific price, it will be easier to understand. Suppose $65438 +0 is equivalent to 5 francs. One day, the US government announced that some of its economic policies would allow the dollar to depreciate slowly to around 3 francs (the US government may wish to encourage foreign investors or for other reasons). The next day, the dollar is likely to depreciate rapidly, and a similar situation proves this. Why? Because the announcement of the American government made people think that the dollar would depreciate, and as a result, the dollar really depreciated. The same effect can be seen in today's stock market (another monetary system). If a company announces that its profits are falling, the company's share price will fall immediately.

The supply problem has a much greater impact on inflation. Throughout history, governments often solve financial problems by printing more money. This may lead to a sharp decline in the value of money, especially in the modern market where money is not linked to gold. In an economic system, if the number of dollars doubles, the value of these dollars will be half of the original.

After World War I, Germany was forced to pay about $33 billion in war reparations. At that time, the actual output of Germany could not reach this amount at all, so the only choice for the German government was to print more and more currencies, which were not linked to gold. This led to the worst inflation in history. As of 1 923,420 billion Deutsche Mark can be exchanged for1cent! 19 19 What you can buy only needs 1 mark, and it will cost 726 billion marks at this time.

"Inflation" was originally used to refer to the increase in the amount of money in the currency circulation system, and now many economists still follow this tradition. However, many economists call this situation "currency inflation" to distinguish it from "price inflation".

Technically, "price inflation" means that the price of goods rises or more money is needed to buy the same goods. "Currency inflation" is the price increase caused by the increase of money supply, which is called "hidden tax" imposed by the government on domestic consumers. It is generally caused by the government's "printing too much money". Although the actual process is a bit complicated, not just as simple as starting the printing press, the essential result is the same: that is, the actual currency in circulation exceeds the actual demand.

With the increase of money supply, the actual purchasing power of money has declined. The government can spend the newly issued currency at the old value in advance, and consumers find that the currency in their hands is far less valuable than before. This process usually takes 18 months to 2 years to recover. At present, most economists believe that "currency inflation" is an important reason for "price inflation".

However, currency is not the only measure of "inflation". Now, many economists divide "inflation" into cost-driven inflation and demand-driven inflation according to different reasons.

Cost-driven inflation: this is caused by the sudden increase in production costs and the decline or stagnation of consumer demand for products or services. This extra cost or extra expense will be transferred to consumers in the form of rising retail prices.

Demand-driven inflation: Simply put, there are too many currencies and too few commodities. This situation is generally due to the reduction of supply, or the demand for goods or services in the whole economy exceeds reality. Therefore, prices will rise until the new supply is enough to meet the needs of society. This kind of "inflation" mainly occurs in rapid economic growth or developing countries.

There are many parameters to measure "inflation", such as raw material price index (RPI), industrial product ex-factory price index (IPPI) or consumer price index (CPI). However, because economists, market strategists and politicians pay more attention to the changes in consumer prices, CPI has become the most commonly used parameter to measure inflation. Although in a country, price changes may also be related to market conditions, supply capacity and transportation costs.