Inflation is a very common topic. Legislator hinder picking it up, and in the enterprises and on the financial markets, the topic of inflation is often talked about. But what is inflation anyway? How is it initiated? We look at that in this video. Hi, my honour is Thomas from Finanzfluss and today we are going to talk about inflation. We has so far been exploited the word in many videos, e.g. B. have calculated how much return we have to have at least in order to at least outdo the inflation rate. Today we take a detailed look at what inflation is and how it exists. We generally speak of inflation when the price level of goods and services rises. When that happens, it simply meant that our fund is worth less and we can buy less for the same dollar amount. Has a scoop of ice cream in the past e.g. B. expense 0.50 and costs 1.00 today, then my 1.00 has lost its buying superpower, namely by precisely half. I used to be able to buy two scoops of ice cream for 1.00 , now only one. And that is exactly the effect that is called inflation or devaluation or a decrease in obtaining capability. But their own problems with inflation is that you don’t always have all the past costs of every possible commodities in your psyche. That means you have no real feeling for inflation, only a subjective feeling, like “Ah, there are some things that have become more expensive”, “Life used to be much cheaper”, etc Ask how you can find out how high inflation really is, untroubled by subjective impress. In Germany, the inflation rate is measured by the Federal Statistical Office in Wiesbaden.The officials at the Federal Statistical Office create a basket that indicates the average German household of 2.3 members per household. The median uptake of this average family should then be contained in this shopping basket. The browse go-cart can be divided into three categories: Everyday commodities, such as B. normal food or detergent, things that you really need every day, then durable fiscal goods, such as e.g. a bathe machine or a car and invests, and the third category is services, e.g. B. a tour to the hairdresser or assurance that you have to pay for. Officials then compare the prices in that basket each month and then compare how the prices have derived from month to month.These progress can then be read in so-called consumer price indices. If the shop go-cart has e.g. For example, if it expenditure 100.00 in one year and 103.00 the next year, the inflation rate for this representative basket was 3 %. As you can probably imagine by now, there is no household with 2.3 members. Some will perhaps have one, some two, three or more, and the statistical browse basket will very probably not be exactly the same as your personal shopping basket. Do you live e.g. B. for lease and are non-smokers, the rental price improvements or the development of tobacco premiums are completely uninteresting for you. In your lawsuit, the store cart will gaze completely different. Of course, government officials at the Federal Statistical Office also know that this inflation rate, which is defined there, very probably does not correspond to the personal inflation rate. That’s why you can find a calculator on the internet site of the Federal Statistical Office that you can use to calculate your personal inflation rate. You can find the link to it in the description below. Now that we know how inflation is measured, let’s deal with the topic of how inflation originates in the first place and why rates are rising. One rationale premiums are rising may be that the money supply is growing faster than the equip of goods. What does that planned? If there is more money in circulation but there is still just as much commodity, then the amount of money we have to pay for a commodity will be enhanced. The amount of money can B. by the ECB, the European Central Bank, seeking an swelling monetary policy. You can learn more about this topic by watching our ECB video.Another reason that inflation exists, i.e. costs rise, can be that production costs likewise rise. This means that e.g. For example, raw material become more expensive or laborers in a company demand higher wages because the company is doing well. The corporation then delivers this cost increase on to its clients in the form of higher prices. Such inflationary rounds exist particularly in good business years, when companies generate good earnings and employees require higher wages, which are then also paid under and the employees can also consume more due to the higher wages.This increased intake then continues to stimulate the economy and companies in turn make rates so that they do not thumped their yield limit. Since inflation occurs when the economy is strong, it’s not certainly bad either, as long as it’s in the region of around 2 %. When talking about inflation, three different levels can be distinguished. First, there is creeping inflation. This is defined as inflation of up to 5 % per year. The next theatre is rushing inflation, which represents inflation rates of up to 20%. And as soon as it goes beyond this 20%, so from 50%, one speaks of hyperinflation. While slithering inflation isn’t undoubtedly a bad thing, blowout or hyperinflation is very dangerous. In Germany we experienced this hyperinflation from 1914 to 1923, which was accompanied by a major economic recession and high political instability. During this phase of high inflation, it happened last banknotes were worth less than wallpaper and are thus glued to the wall. A loaf of bread cost several million marks. Such scenarios naturally lead to an extreme loss of confidence in the monetary system. You precisely can’t trust it anymore, because it’s possible that the money you give today will only be worth half as much tomorrow. Well , now that we know what causes inflation and how it is measured, let’s take a look at the character inflation plays for us personally in our investments. Mostly, one can say that inflation is bad for investors, bad for people who invest their money, and very good for borrowers. Speak for governments, companies, but also private individuals who have a high mountain of obligation. First, let’s look at the investor side. On the investor side, inflation stimulates your fund value less.Therefore, when talking about interest rates, a distinction is also made between nominal and real interest rates. The nominal interest rate is what I firstly get directly out of an investment. Do I have e.g. For example, if I invest in a bond that compensates a nominal furnish of five %, I initially get 5% out of this investment. Of these 5 %, I then still have to compensate for the loss of money, i.e.The inflation rate of, say, e.g. For example, subtract 3% and get a real return of 2 %. That means my speculation gives me 2% more obtaining ability after inflation. After all, this return is positive, there existed some financial assets, such as B. Savings accounts or some money market accounts where the real rate of return is negative. This meant that the nominal return, i.e. what you are paid for the financial product, is lower than the inflation rate and you therefore lose obtaining capability. This is why it is so important for investors to invest in real resources. Real assets are investments that can be described as inflation-protected. These include e.g. B. capitals, real estate, but also matching makes on it, z. E.g. equity monies, real estate funds, but likewise ETFs or merchandises. An advantage that z. B. has an AG, i.e. a inventory organization, is that it can react to inflation. If the general price level rises, the company can benefit by increasing its premiums as well. The opposite of real assets are so-called monetary assets.These are appreciates that correspond exclusively of coin, such as B. a announcement fund or a bond. So from this categorization you can already see why it is so important to invest in stocks and not leave all your coin in an overnight deposit account. You may get a few percentages there, but the real return is usually negative. Shares, on the other hand, frequently ever have a positive real return if you expend widely and for a long time, which means that you gain obtaining strength with your investments. Earlier I mentioned that the winners of inflation are usually debtors. If inflation meant that the value of money descends, this is useful for debtors because their debt burden likewise falls, measured in terms of buying power. That is why highly indebted countries often have an interest in having inflation rates that are as high-pitched as is practicable. You can use these inflation rates e.g. B. by publishing a lot of money. For this reason, if you find yourself in an inflationary scenario, you have to think carefully about whether you actually want to be invested in attachments, because attachments are nothing more than debt.Finally, I would like to say that one should not let oneself go crazy when it comes to inflation. In recent years we have had exceedingly moderate and acceptable inflation rates and the subject of inflation is often used as a specter and dread mongering when selling in the financial sector. So if you are offered a financial product that has a certain “inflation protection”, that is particularly safe, etc ., you should be particularly careful. You should just as little as one z. B. buys products from a purely excise perspective, and too does not buy any commodities purely as protection against inflation. I hope that members can experienced this video. If so, please give us a thumbs up. And if you haven’t subscribed to the channel hitherto, we’d truly applauded the fact if you subscribed to us. We regularly upload brand-new videos and lessons on the topics of fiscal commodities, financings and investment strategies to build the world of finance easier to understand for you. We want to help you to have your finances under control and being allowed to prepare independent decisions. If you have any questions or suggestions, please let us know in the comments below. Until the next video ..
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