My Inflation Concerns

To say I’m deeply worried about inflation is an understatement. Australia seems to be better positioned than most countries to meet a world comprised of stagflation, no thanks to the mining boom and various productivity increases in the last decade. This doesn’t mean we are inflation proof; to the contrary, we enjoy a modern economic society that relies on a low but present inflation figure that shows little variation from year to year. This inflation figure, relativly unchanged, is what keep lenders confident about handing over money to borrowers who seek capital to make improvements in their lifestyle. Housing, car, and personal loans are all a very important staple for both the middle- and even the lower-class. Borrowing gives intelligent people an opportunity to promote themselves up the socio-economic ladder.

When inflation, or worse, stagflation arises in an economy (or in the likely present day form, the global economy), problems begin to occur. Lenders suddenly need more from borrowers to secure a loan. Existing loans are now highly scruitinised. Re-financing and other debt tools suddenly disappear as an option. Earning power from savings diminishes as interest rates and inflation rates slowly begin to meet. Cost of goods rises further, as managers are forced to put up prices to keep its own revenue stream healthy in comparison to previous years.

One word describes this poetically: the crunch. Inflation crunches an economy. What happens during a crunched economy? Jobs become less plentiful, government projects/hand outs dwindle, and people relying on a ‘life plan’ involving the use of the previously mentioned finance tools are in for a real shock.

Big picture, a US based blog, featured a great post and subsequently, a great quote today.

Money quote:

Everybody loves an easy bartender, pouring generous drinks, filled with lots
of alcohol.

No one likes the hangover the next day.

Which is what we are experiencing today.

I certainly hope our Australian way of ‘chinning up’ during a hangover with litres of gatorade and panadol will solve the problem. I just hope we don’t try and drive to work in denial about our state.