What is the remedy for inflation? Why is it such an important economic topic?
488886
Inflation essentially devalues money.\n\nDuring WWII inflation in Germany reached nearly 100% per day.  People were paid daily and they spent it all on the way home because it would be worth about half the next day.\n\nThe main way I have seen inflation controlled is by manipulating interest rates.  By raising interest it costs more to "rent" money.  This has a tendency to slow most economic activity.  A slower economy will normally reduce inflation.\n\nIf you want inflation to go up, print more money.  \n\nI was on active duty with the US Air Force during President Carter's double digit inflation period.  Inflation was around 18% and we received "cost of living raises" under 2%.  We considered ourselves Uncle Jimmy's inflation fighters.  It took five or six years to get our pay back to where it was when "run-a-way inflation" took over the economy.  I hope that sort of crap never happens again.
152394
the main cause of inflation is the government increasing the supply of money. But it is a little more complicated than that.  When the price of oil increases, the costs of everything that depend on oil also increase, for example. That then causes an increase in prices charged to workers. Workers then demand increased wages to maintain their standard of living. Employers give them higher wages without too much fuss because they know that they can pass the increased costs on to consumers.  The government facilitates all of this by printing more money. The government loves inflation because they borrow a lot of money at fixed interest rates. If they can cause the value of the dollar, peso, pound, euro, or whatever to decline they do not have to pay back all of what they borrowed. A neat trick and used successfully by all governments. Inflation also increases tax revenue.  If a person buys a share of stock for $100 and ten years later sells it for $200, he has to pay taxes on $100.  But if the inflaction rate is 4%, he actually made only $52. So the government makes out like a bandit again. The same goes for all borrowers.  \n\nOn the other hand those who lend money are loosers. Consequently, inflation tends to dry up the sources of capital. It is better to spend your money than to save it. Hence, that is why people have not been saving money since 1999, because Greenspan reduced the interest rate to 0. People are not as stupid as the government is.
645558
We are experiencing relatively high levels of inflation. That is why our dollars are losing value in comparison. But you should remember that this makes American goods more expensive, which will decrease net exports....this should make some conservatives happy (those who argue that we have a negative trade balance with countries like China). Anyway, this is not necessarily a bad situation, it just depends on how you view it on the political spectrum. Oh, P.S. I am a conservative also, I just read what I wrote and realized that it came across wrong. No offense
339120
I doubt it.  There are many different ways to look at the economy.  One of them is the unemployment rate.  During the depression and the times leading up to it, our unemployment rate his 25% or so at its peak.\n\nRight now, we're actually doing better, as the unemployment rate has been steadily decreasing for the last few years.\n\nSee this chart: http://www.economagic.com/em-cgi/data.exe/feddal/ru\n\nAlso, if you go here: http://www.bea.gov/bea/dn/nipaweb/TableView.asp#Mid\n\nGDP has been growing pretty steadily for the last few years, even after taking into account increase in the CPI for inflation.  The economy is actually relatively healthy right .  There's just a lot of big stories on the media because people are paying a lot for gas, so stories about a possible depression sell really well.
1116586
If higher interest rates contribute to inflation then the Federal Reserve so have it wrong!!\n\nMost inflation is believed to come from an over active economy with too much money chasing too few goods. By  raising the cost of borrowing money, it reduces the amount of money people have to spend on more stuff. That slows down the economy. \n\nMost businesses don't rely on borrowed money to stay in business. They typically used borrowed money to expand their business or acquire other businesses.
479948
On the other hand, having a little bit of national debt can be a good thing, because it allows the treasury to sell bonds on the debt, which is an important tool for monetary policy and allows the government to mitigate inflation.\n\nLots of debt is definitely a problem, though.  My theory on why people don't understand things like this (or act like they do) comes down to a combination of laziness, stupidity, and selfishness -- the unholy trinity of human failure.
341232
because most work places do not consider Inflation as part of a common pay raise.  If inflation rises up 5% and your pay raise is 1 - 3%.\n\nYour uphill battle begins.\n\nInflation is NOT always considered a bad thing but a process that assists finaicial markets.
1186988
No, not entirely.  However, a gold standard would eliminate a lot of the incentive to create the types of inflation we've seen in recent history.\n\nInflation comes when the money supply is expanded while the supply of goods and services holds constant.  You end up with more money chasing the same amount of goods, so prices expand upward.  That's the side of inflation we see.\n\nIn a fiat money economy like we have now, the government or the central bank can expand the money supply at will, and inflation can develop.  Since the government benefits from effectively printing up more money, there's a lot of incentive to inflate and disrupt people's lives.\n\nOn the other hand, a gold-standard economy leaves far less room for government or central bank manipulation, and therefore inflation would seem less likely.  On the other hand, there were cases of inflation during times like the California Gold Rush, when lots of new gold came onto the market.  On balance, however, I'm still inclined to think that the gold standard would be more dependable than putting my faith in government bureaucrats to stabilize my money.
438298
I'm sure an Econ person is way more qualified than I to answer this question but it deals with supply and demand.\n\nThe cost of lending money (as in rising interest rates) makes less people borrow it which means that there will be less people buying goods and services which keeps inflation in check.\n\nThe more it costs banks to lend money by borrowing from the federal reserve, the more they have to charge people who take out loans to recoup that costs.  This means that the price point for borrowing money is higher meaning less people will borrow money because they have to pay back more.\n\nIn the grand scheme of things, this makes business keep their prices in check and not raise them as high as they would like.
189358
It is a way of controlling inflation.  With low unemployment you have more people competing for goods and services which drives up prices.  Higher unemployment means there is less purchasing dollars out there which tends to stablize or lower prices.
32625
Rising prices of fuel increases inflation because almost all man made fibers, plastics etc. are created using oil.  Therefore the cost of raw materials goes up.  \n\nThe factory that produces the finished product has to use energy to produce their goods whatever they may be.\n\nThese goods then have to be shipped to market using transportation that requirs fuel.  \n\nAll this leads to a spiral of inflated cost throughout the supply chain which causes an increase in inflation throughout the global economy.
823137
It's a way to gauge interest rates, but a poor way to gauge personnel inflation.  If you love cheese and movies and have serious health care problems, your personnel inflation rate will probably be several times higher than the CPI.  I was watching one show where this guy's personnel inflation rate jumped 1,500% from the previous year just because of what he bought.
1041863
Primary reason? There's rarely just one reason.\n\nWhat was the reason for the stock market crash in 1929? They're still writing about it and coming up with reasons. \n\nWhat is the reason for fluctuation in prices? In the short term, it's human emotion, primarily fear and greed. In the longer term, it's supply and demand. \n\nYou listen to too much media hype, and actually think you are informed and just missed a show or something, like someone really has "THE" answer. I meet investors that read the Wall Street Journal cover to cover and think they are informed. \n\nThe stock market is a predictor of the economy six months from now. And six months from now, they will have figured out what happened today. But right now, nobody has a crystal ball.\n\nYou don't have to know "Why" or "What" or "the reason." I would say you can't possibly know that. You ask ten economists or traders, or "experts" and you'll get 11 answers. What good will that do you? You going to make decisions based on a newscaster? Just follow the price and volume of the here and now.\n\nSometimes there are no reasons. The market goes where it wants.
1099796
Ignoring the Bush-bashing despite how much I might like it.\n\nRepublicans nowadays are "pro-business" or basically in economics "supply-siders".  It's a view where if the means of producing things, in this case businesses, are able to produce more, it will benefit the economy with higher production and lower prices.  Now, if the minimal wage was to be increased, where is that extra money going to come from?  The pockets of business owners and companies.  This means a higher cost for them which would mean that they aren't making as much money.  Since they are not making as much money, they will make less, creating higher prices from shortages and too much demand.\n\nOn the other hand, if we did have an increase on minimal wage, it could lead to higher inflation.  Companies may want to increase prices to soak up the extra cash.  In addition, it would be up to the Federal Reserve to control the inflation.  They may choose to do so by increasing the reserve requirement, making it harder for you to get a bank loan.  They may also choose to increase the prime interest rate, increaing all other interest rates elsewhere, hurting everyone in the economy.\n\nThe economy is a fickle, little thing.
706989
Current inflation rates are a bit higher than the central banks would like to see, but not so high that they are affecting most peoples' habits.\n\nThe real estate market is actually experiencing a period of recession; many property values are dropping somewhat.  This tends to be somewhat localized though so it may or may not apply to your area.
503501
Assuming that the matter concerned remains the same (e.g. a coke), inflation essentially means that its price has increased over time (e.g. from $1 to $1.25). It can be caused by deflation of currency (e.g. Brazil), economy growth (price driven up when demand > supply) etc.\n\nThe impact of inflation to economy is immense and is hard to be explained in this forum. Suffice to say is that it is an indicator closely monitored by most governments.
463902
At one time money was back up by precious metals (gold, silver).  You could take a twenty dollar gold certificate to any bank and they would have to give you that much in gold.  In the 1950s they dropped the gold standard and went to a debt standard.  For every dollar in circulation there is a dollar owed.  This is what causes inflation.  Example, in 1900 a twenty dollar gold piece would feed a family for a week or more, the same gold piece today will feed a family about the same amount of time.  Hope this helps.