We all face a lot of financial problems one way or another. Many of you may know our country to faces a lot many financial problems.
Even the wealthiest countries across the globe to face financial problems in many different ways.
But the harsh truth is It will never stop!!!
We are all familiar with the rise in inflation day-by-day. But do we know why the inflation rate is increasing? Else have we ever tried to know the reason behind it?
What can we do to stop inflation?
The inflation rate will never fall, rather it will climb more. Therefore, it will be very much difficult for average people in the near future to get a proper meal with their current daily wages.
We’ve all heard that the ‘rich get richer while the poor get poorer’. But do you know why this is so? Or maybe you haven’t even tried to know.
Ignorance is the main reason which made us all slave to the system.
It is very important for us to know about our monetary system and the world economy. Not understanding these things can create a negative impact on all of us.
The true wealth of a person is measured by his time and freedom, which literally has been stolen from us these days.
Before understanding this, it’s very important to understand the history of money and how money came into existence.
History of money
Money has been part of us from last 3000 years. Earlier, bartering system was used in lieu of money to buy anything which you all may know. If you don’t let me tell:
Bartering system is a process of direct trade of goods or services. Suppose, I have rice and you have wheat. I will give you rice in exchange for wheat. This system was good, but it had too many complications and was time-consuming.
Later, people understood the value of gold and silver. So, they started making gold and silver coins in order to trade with it.
Keeping too much gold and silver seemed to be difficult and riskier. Few goldsmiths found a business opportunity to overcome this problem. They promised to look after the merchant’s cash with minimal fees and everyone liked the idea.
These goldsmiths gave a receipt( like a banknote )to the merchants in exchange for the golds, they deposited. By showing that receipt, they can any time withdraw their money.
After some time, the goldsmiths noticed that merchants depositing their money never came back. Instead, they started trading with the receipt only they got from goldsmiths.
They found another opportunity to lend a part of that money to others, earning an extra interest from them. This made them more money.
This is how the first banking system started. The place where the goldsmith stored the money was the bank and the receipt they made was the currency.
Difference between currency and money
Many people make a mistake by thinking that both currency and money are the same things. But actually, they are not.
Currency is just a medium of exchange. It is used as a physical representation of value that changes over time.
Money is also a medium of exchange. But money has its own value and maintains its purchasing power over a period of time. Money has some properties which increase its value over time.
Gold, Silver, etc are all forms of money which maintained its purchasing power over the last 3000 years.
A currency has no intrinsic value. It is just used as a physical representation of money which changes over time and varies from one country to the next.
While the biggest problem is that our government can print as many currencies they wish. Historically, there have been many currencies and all fiat currencies have gone to ZERO. That’s a 100% failure for all those fiat currencies.
Reason for Inflation
Since our government prints all our currencies. So, they can print as many they wish. But they actually do this i.e prints as many currencies they wish and brings into the market. This increases the quantity in the market.
Now, you may be thinking What is the problem in printing more currencies? It should good if there will be more currencies in the market.
If you’re thinking that way, you’re wrong. This is the main reason behind Inflation. In simple words, inflation occurs when the supply of money increases.
When the supply of money increases in the market, it loses its purchasing power and the price of goods and services increase.
Also, the game of fiat currencies is running because of the bank’s confidence and our lack of knowledge. We don’t even understand this basic thing.
The currency which we value more than anything is not the actual money. It is losing its value day-by-day because of inflation. Let me explain with an example how money loses its value regularly.
Suppose, today you get a liter of petrol for $1. Now, if you buy the same amount of petrol in the next year, it may cost you $1.20 or more. You will not get the same quantity at the same price. That means your currency is losing its value. This is inflation.
- Understand this topic properly and also try to educate others. Many people in our society today don’t have financial knowledge. No schools/colleges try to give proper financial education to students.
- Think of doing business instead of hopping into a job. Try to get rich. Not just for yourself, but for others and for your country. Because only business has the power to fight against this system.
- Learn to invest in golds, bonds, stocks etc which keeps its purchasing power for a longer time. Governments cannot print these as many they wish.
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