Inflation in the U.S.

Imagine saving $100,000 over the course of twenty years, let’s say from 1980-2000.  We would assume that person was smart by saving this amount of money.  Well, what if I were to tell you that if you put $200,000 in the bank in 1980, it would only be worth $100,000 in 2000.  Would we still assume that person did well putting that $200,000 in the bank? This is exactly what happens to people who are disciplined and save.  $100,000 in 1980 could buy you what $210,000 would buy you in 2000 and $280,000 would buy you today.  This is and example of inflation.  How many people would actually see saving money as a negative?  This makes it difficult for people to save for retirement unless they’re getting a pretty good return on their investments just to keep up with inflation.  The interesting thing is that this inflation rate is actually not that bad.  In some countries where they have had extreme hyperinflation such as Zimbabwe the prices were doubling every few hours and the government just kept printing more.  This led to the collapse of the Zimbabwe dollar and today they use currencies from other countries.  Another example is the Weimar Republic which was Germany between 1921-1923 where the money was so devalued that people used it to burn to keep warm cause it was cheaper than buying wood.  Many argue that this led to the rise of Adolf Hitler.  Both of these countries are extreme examples of continuing the printing of money for many reasons, including the payment of debt.  This is relevant to the United States because of what we continue to hear about quantitative easing by the Federal Reserve.  As complex of a term as this is, it is simply a fancy way of saying the printing of money.  I believe this continued printing of money can lead us down the road to increased inflation.  Increasing exports is also another trigger; this means the devaluation of our currency.  We are not increasing production, so the only other way to increase exports is to devalue our currency so other countries can buy more from us.  I believe for the average American this is terrible because it leads to an incredible increase in prices.  Just imagine if Monday you paid $5 for a sandwich and by Friday it costs $25.  This has happened in other parts of the world and it has brought down entire economies.  We need to pay our debt and stop the printing of money so this possibility doesn’t become reality.  The more discipline we have as a society, the better off we will be.