By Ylva Jansson
Things Are Tough All Over
It's the truth, around the world today every country seems to be experiencing economic troubles the likes of which have never before been seen. Understanding the causes of current global recession and inflation is the first step in arming yourself with the knowledge you need to protect. Continue reading and I'll explain some of the causes and effects.
Recession and Inflation
To start off, let's define recession and inflation. Recession is measured by a nation's Gross Domestic Product (GDP). The GDP is a total of everything that was produced within the territorial boundaries of that nation. It does not include that nation's companies who produce their goods overseas. A recession is a steady decline in the GDP of less than 10% over a period of several months.
Inflation refers to the decline of a currency's purchasing due to devaluation and price increases. While inflation is considered a normal part of the "business cycle," it can cause concern when it happens unexpectedly or at a higher rate of speed than expected.
Four Main Factors
1. One of the most insidious and pervasive causes of inflation is the excessive printing of currency. When currency production is not carefully controlled, its growth rate may overtake that of the nation's GDP. Because of this, prices go up sharply to compensate for the devaluation of that currency. It is referred to as the Demand-Pull effect. In this country, we rely on the Federal Reserve to control our currency. However, as the Federal Reserve is a privately owned international cartel, there really is not much interest in protecting the financial well-being of our citizens.
2. Increased production and labor costs is another element that drives inflation. As production costs rise, so do prices which can further damage the currency's purchasing power. The same is true for increased labor costs as the additional expense is simply passed on to the consumers.
3. National debt is yet another factor. As nations are called on to pay their debts with a hefty interest payment, prices sky rocket resulting in a drop in exchange rates. Higher prices are the end result as the nation's government tries to deal with the gap between imports and exports.
4. When governments increase taxes, this again puts the burden on the citizens. If it is a direct tax, that money is taken out of the citizens' paychecks. In the case of an indirect tax placed on products, the added cost is simply passed down to the consumer.
Woe Be the Consumer
So you begin to see the effects related to the causes of current global recession and inflation. It is the consumer / citizen in every case that must bear the brunt of economic hardships even when those hardships are a result of mismanagement at the government level. As a consumer, it behooves you to learn all you can about the mechanisms behind our current economic crisis so that you can begin to protect yourself as things get worse.
It's the truth, around the world today every country seems to be experiencing economic troubles the likes of which have never before been seen. Understanding the causes of current global recession and inflation is the first step in arming yourself with the knowledge you need to protect. Continue reading and I'll explain some of the causes and effects.
Recession and Inflation
To start off, let's define recession and inflation. Recession is measured by a nation's Gross Domestic Product (GDP). The GDP is a total of everything that was produced within the territorial boundaries of that nation. It does not include that nation's companies who produce their goods overseas. A recession is a steady decline in the GDP of less than 10% over a period of several months.
Inflation refers to the decline of a currency's purchasing due to devaluation and price increases. While inflation is considered a normal part of the "business cycle," it can cause concern when it happens unexpectedly or at a higher rate of speed than expected.
Four Main Factors
1. One of the most insidious and pervasive causes of inflation is the excessive printing of currency. When currency production is not carefully controlled, its growth rate may overtake that of the nation's GDP. Because of this, prices go up sharply to compensate for the devaluation of that currency. It is referred to as the Demand-Pull effect. In this country, we rely on the Federal Reserve to control our currency. However, as the Federal Reserve is a privately owned international cartel, there really is not much interest in protecting the financial well-being of our citizens.
2. Increased production and labor costs is another element that drives inflation. As production costs rise, so do prices which can further damage the currency's purchasing power. The same is true for increased labor costs as the additional expense is simply passed on to the consumers.
3. National debt is yet another factor. As nations are called on to pay their debts with a hefty interest payment, prices sky rocket resulting in a drop in exchange rates. Higher prices are the end result as the nation's government tries to deal with the gap between imports and exports.
4. When governments increase taxes, this again puts the burden on the citizens. If it is a direct tax, that money is taken out of the citizens' paychecks. In the case of an indirect tax placed on products, the added cost is simply passed down to the consumer.
Woe Be the Consumer
So you begin to see the effects related to the causes of current global recession and inflation. It is the consumer / citizen in every case that must bear the brunt of economic hardships even when those hardships are a result of mismanagement at the government level. As a consumer, it behooves you to learn all you can about the mechanisms behind our current economic crisis so that you can begin to protect yourself as things get worse.
