She probably isn't exaggerating! Things were likely cheaper back in the day. ๐
So, *whatโs going on?* Why are prices rising over time? Letโs talk about *inflation* โ itโs a key reason why everything seems more expensive today!
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*What is Inflation? ๐ค*
Inflation is when the prices of goods and services rise over time, and it often happens when there are irregularities in the *supply and demand* for those products.
- When demand for products goes *up* and supply doesnโt keep pace, prices rise. ๐
- When the cost of *producing* goods increases (due to things like wages or materials), businesses raise their prices to cover those costs.
While inflation can have *some benefits* (like reducing debt value), too much of it can cause serious problems.
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*Why is Too Much Inflation Bad? ๐ซ*
- *Erodes Savings:* The worst part? *Inflation* eats away at the value of your savings. So, the money you saved for years wonโt buy you as much as it wouldโve in the past. ๐ฌ
- *Purchasing Power Drops:* The more inflation rises, the less you can buy with your money. ๐ค
Thatโs why *governments* often take steps to control inflation, to make sure it doesnโt spiral out of control. ๐
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*How is Inflation Measured? ๐*
Inflation is typically measured by the *Consumer Price Index (CPI)*, which tracks the average price of a basket of goods over time. When the prices of things like food, gas, and housing go up, the CPI shows that inflation is happening. ๐
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*Impact of Inflation on Crypto ๐ฅ*
Inflation also impacts the *crypto market*, in ways that you may not have realized:
- *Hedge Against Inflation*: Some investors view *Bitcoin* and other *cryptos* as a hedge against inflation because, unlike fiat currency, thereโs a *fixed supply* of Bitcoin (21 million). So, in times of high inflation, people may turn to crypto as a store of value. ๐ฆ
- *Volatility*: However, crypto is *volatile*, and while it may act as a hedge, it doesnโt always perform predictably during inflationary periods. ๐
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*How to Protect Yourself in Inflationary Times? ๐ก๏ธ*
- *HODL (Hold On for Dear Life)*: In crypto, itโs common advice to hold your assets long-term through *market ups and downs*. ๐
- *Diversify*: Donโt put all your money into one thing. Itโs better to spread your investments across different assets to reduce risk. ๐
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*Conclusion: Inflation is a big deal! But with a little knowledge, you can make smart decisions to keep your money working for you.* ๐ก