Today, if you were to shop at the local grocery store and pay $100 for your food, you would be pretty upset if the price went up to $110 tomorrow. If it kept increasing $10 every day, you’d be even more upset. What most people fail to realize is that this scenario isn’t just hypothetical — in Turkey, inflation has been running at 80% per year!
Point 1: The difference between 0.1% and 0.8%
In most developed countries, a little inflation is actually considered good for the economy. It encourages spending and discourages saving, which can help spur economic growth. A inflation rate of around 2% is generally seen as ideal. So when people complain about a 10% inflation rate, they're really only experiencing a slight increase in prices.
Point 2: The material cost of higher prices is insignificant
While a 10% inflation rate might seem like a lot, and indeed, it is higher than the ideal rate of 2-3%, it's not as bad as it could be. For perspective, let's compare it to Turkey's current inflation rate of 80%. At that rate, prices are doubling every 9 months! Now THAT is inflation.
Point 3: Many countries have even worse rates than ours
No, 10% inflation is not that bad, especially when you compare it to other countries. For example, did you know that Turkey is currently experiencing an inflation rate of 80%? Yes, you read that correctly - EIGHTY PERCENT. And life still goes on there. People are still working, going to school, and living their lives. So if they can do it with an inflation rate over 8 times higher than ours, surely we can manage our measly 10%.
Point 4: Higher prices mean lower incomes
While inflation may not be as immediately noticeable in developed countries, it does have an impact on people's purchasing power and standard of living. When prices go up, incomes don't usually keep pace, which means people have less money to spend. This can lead to lower consumption and economic growth. In countries with high inflation rates, people may start hoarding cash because they're worried that prices will go up even more. This can further exacerbate the problem by leading to even lower demand and higher prices.
Point 5: Even if we had no inflation, life would be much harder for low-income families
Low-income families would be disproportionately harmed by a lack of inflation. Without inflation, prices for goods and services would remain static, but wages would not. This would lead to a decrease in purchasing power for low-income earners, who would then have a harder time affording basic necessities. Additionally, static prices would hurt businesses that cater to low-income customers, as they would have less money to spend. In contrast, high-income earners would benefit from a lack of inflation, as their wages would go further.
Point 6: Higher costs drive up salaries, so that despite high price increases, salaries aren't affected all that much
Inflation can have different effects on different people. While some people may see their salaries staying the same while the cost of living goes up, others may find that their salaries go up right along with inflation. In general, though, higher costs do tend to drive up salaries. So despite high price increases, salaries aren't usually affected all that much.