Everyone hears about it on TV, and many people curse at it thinking it destroys their lives, even though they don’t really understand how it works. If you ever asked yourself that very question, you might think it is way too hard to comprehend, and that only the rich people who studied economics are able to use it properly in their lives. However, please allow me to tell you that it’s actually really easy.
Imagine you are the supreme leader of a country and you hold all the power, including that of making and sustaining the monetary system. In the beginning, you start by creating a currency. Let’s call it a “pound”, but it can have any name you want. Remember, you are the ruler of this country.
And what an inexperienced ruler you are! Because of the bad infrastructure in your country, the people are poor. However, you are a good person at heart. Yay! You decide to give people more money, so you increase their salaries. You are such a great leader! The people are loving you!
But wait a second: what money do you give to the people? You do not have that much money yourself, everything is going towards helping the country grow. That is when you remember a very important thing: you are the supreme leader! You can create more money!
As such, you literally “print” more money, so you give it to them. Everyone is happy! Right?
Well, not quite. The fact is, one “pound” is now worth less than it used to be. One loaf of bread now costs twice as much as it used to. One bottle of milk now costs two times as much as it used to. One car costs so much more than it used to. But why? The peasants ask you this very question, the citizens ask you this very question, everyone asks you this very question. They are not happy about it.
Let me explain why using another example. Learn what you can from the last one, but it ended. Off with your head! What a poor excuse of a leader you are! Moving on, you can still ask yourself the very same question as they did: why did everything become more expensive? Is this inflation?
Yes, yes it is. Imagine you have only one friend, but you love him/her very much. First of all, go make some more friends, you incompetent fool! If that friend leaves you, you are heartbroken and you will feel like your very world ended. However, if you have one hundred and one friends and you love all of them equally, then, if only one leaves you, you still have many more friends to go to for comfort. The loss is not that great, since that one sorry excuse of a friend that left you was worth less than the one in the first example.
Did you understand inflation yet? Yes? Great! Not really? I’ll try giving you another example. Let’s say you are five years old. You’re so small and cute! Also loud and nosy, but mainly small and cute. One year for you feels like an eternity, right? That is because twelve months is like 20% of your entire existence on this Earth. What if you are 69 years old? One more year is still a long time, but it feels so much shorter than what it used to back when you were playing in kindergarten, right?
That is inflation. One single thing of which there is more of is less important/valuable than if it was less of. I hope you understand this term people throw around like tomatoes better now. Good luck with your next country, supreme leader!
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