The Dangers Of Inflation Essay, Research Paper
The article Time To Pop The Party, written by Bernard Baumohl, demonstrates that
inflation is a inevitable occurrence in our society. Even though the United States economy
continues to grow and prosper it still faces the problem of inflation. Some people describe
inflation as the decrease in the value of a doller. During a period of inflation the general price
rises. In its extreme form inflation can have catastrophic effects on a nation.
No matter how much a nation may thrive economically it still must face the problem of
inflation. As shown in the article Time To Pop The Party the United States is under going a
unprecedented economic time of prosperity. The United States has been increasing its gross
domestic product every year for the past eight years, which is the longest in the history of the
United States. Consumer spending has increased and unemployment is at a record low. After all
this economic success our nation still under goes the problem of inflation.
Inflation may be caused by several different reasons. Inflation may be a direct result of
goods and services being in great demand and the economy not being able to satisfy this demand
which is called down-pull inflation. Another reason for a rise in the level of prices is when the
cost of doing buisness is increased which is called cost-push inflation. When the Federal
Reserve raises the rates of interest financial markets increase their prices.
Inflation can have disastrous effects on any economy as demonstrated in Germany
following World War one. The year before the war 4 marks could be exchanged for one doller.
But after the war 4,000,000,000,000 marks were neccessary in order to exchanged for one doller.
As a result of this drastic inflation the German people needed a barrel full of money to buy a
single newspaper. People who depend on fixed incomes are hurt by inflation because their
income loses its value. People with savings in the bank basiclly lose all their money because the
money saved loses all its value. After a great rise in the general prices a nations economy is
devastated becsuse of this our goverment takes measures to prevent inflation.
In the article Time To Pop The Party the issue of inflation is observed. Inflation causes
catostrofic effects on a nations economy which is why our goverment is concerned with the
United States economy. Our nation economy continues to flurish but inflation still occurs which
proves that a general rise in prices is inevitable.