THE EFFECTS OF INFLATION ON FIAT AND THE IMPORTANCE OF BUILDING WEALTH ON STEEMIT || By @hisgeneral
It is quite wonderful and very impressive to know and see Financial Security coming up with regular contest and am highly pleased to be a partaker of this contest episode which takes a study on The Effects of Inflation on Fiat and Importance of Investing in Steemit.
- The study takes a deep look into the following:
- Different factors that causes inflation on rate on the conventional financial system.
- Importance of investing in the Steemit platform considering the dwindling economic and inflation rates.
- A share of view on Steem entry Value and that of steem value as at the time of post for those that have invested in steemit.
- Possible achievements by investing in the Steemit platform.
Before I start attempting the questions, let's try and understand the key words in the topic of discussion which are: Inflation and Fiat.
While it is not complicated to measure the changes in price of single products over time, human needs goes much beyond one or more of such products. Individuals are in need of a big and variegated set of products as well as a multitude of services to have and live a comfortable life. This products and or commodities include food grains, metal and fuel, utilities such as electricity and transportation, and services such as healthcare, entertainment, as well as labor. Inflation intends to measure the overall significant influence or effect of price changes for a variegated set of products and services, and consents to a sole value representation of the rise in the level of price of goods and services in an economy over a length of time.
Prices increases as a currency's value diminishes, and it purchases a fewer goods and services. This loss of purchasing power to a very great extent affects the cost of living of the general common public which eventually leads to a retardation in economic growth. The consensus point of view amongst economists is that sustained inflation held continuously at a certain level occurs when the money supply growth of a nation exceeds the pace of economic growth.
To fight inflation, the right monetary authority of a nation such as the central bank, then takes the measures required to manage money supply as well as credit in order to keep inflation within allowable limits and have the economy running smoothly.
Theoretically, monetarism is a theory that is that is common among the general public which elaborates the relation between inflation and money supply of an economy. For instance, exceptional amount of gold and particularly silver flowed into the Spanish and other European nations as a result of the conquest of the Aztec and Inca empires. Consequently, the rapid increase of money supply or circulation resulted to the fall of money value, speedily increasing price.
Inflation is determined or measured in variegated of ways depending on the types of goods and services in consideration and is the direct opposite of deflation which points to a prevalent or widespread decline occurring in prices for goods and services when the inflation rate drops below 0%.
The root cause of inflation is the increase in supply of money, despite that this can be perceived through various mechanisms in the economy. The supply of money can be increased by the monetary authorities by either printing more currencies and giving away to the individuals, or by legally reducing the value of the legal tender currency, most commonly by lending new currency into existence as reserve account credits via the banking system by procuring government bonds from financial institutions on the secondary market. Whatever the cases of money supply increase may be, the money loses its value or purchasing power. The mechanisms of how this propels inflation can be categorized into: Demand-Pull inflation, Cost-Push inflation, and Built-In inflation.
Fiat money is a currency issued by the government which has no physical backup by any commodity like gold or silver rather is backed up by the same government that issued it. Fiat money derived its value from the relationship between supply and demand as well as the stability of the government that issues it, in lieu of the worth of a backing commodity just like the case for commodity money. Good number of modern paper currencies are fiat currencies which includes the U.S. dollar (USD), the euro (EUR), and other major global currencies.
The reason fiat money has value is because the government maintains that value, or as a result of two parties in a transaction agreeing on its value. Historically, governments would mint coins making use of a valuable physical commodity, like gold or silver, or print paper money which may be redeemed for a determined amount of a physical commodity. Fiat money is however inconvertible and also irredeemable. The word "fiat" is derived from the Latin and is frequently translated as the edict "let it be done" or "it shall be".
As a result of fiat money not being linked to physical reserves, like a country stockpile of silver or gold, it therefore stand a risk losing value resulting from inflation or even becoming worthless in the course of hyperinflation. A nation's money or currency will hold no value if people loses faith in that nation's currency. This is different from currencies that are backed by gold, for instance; it has inherent value due to the demand for gold in jewelry production, decoration as well as the making of electronic devices, aerospace vehicles and computers.
A Look At The Advantages and Disadvantages of Fiat Money
Advantages
Supposing fiat money can take care of a country's economy needs of its monetary unit such as provision of numerical account, storing value, and facilitating exchange, it then serves as a good currency.
In the 20th century Fiat currencies became widely known in part for the reason that governments and central banks tried to find a way to separate their economies from the worst outcome of the natural booms and break of the business cycle.
*Because fiat money isn't a insufficient to meet a demand or fixed resource like gold, greater control over its supply is with the central banks, consequently conferring on them the power to control and manage economic variables like liquidity, credit supply, money velocity, and interest rates.
Disadvantages
The turning point of mortgage in 2007 and the following financial meltdown, nonetheless, tempered the mental acceptance that central banks could inevitably take preventive measures against depressions or serious recessions through the regulation of money supply.
Generally, currencies that are tied to gold, for instance, are more relatively unchanging, firmly fixed or established than fiat money on account of gold limited supply.
Opportunities abound for the invention of bubbles with fiat money as a result of its limitless and unrestricted supply.
What are the different factors that causes inflation rate in the conventional financial system.
There are many factors that causes inflation in the conventional financial system, the following are most of such factors:
- Primary Causes
Any time in an economy, when the demand for a commodity outstrips its supply, then the excess demand however applies force on the price such that it significantly moves up. In the same vein, as soon as the factor prices rises, the cost of production also rises as well. This as well results to rise in the price level.
- Increase in Public Spending
Government spending in any modern economy is an imperative element of the total spending. Also, it is an important aggregate demand determinant.
Most of the time, in a less developed economies, the government spending rises which constantly creates inflationary pressure on the economy.
Tell us why its important to invest in the Steemit platform considering the dwindling economic and inflation rates.
First and foremost, steemit is not a platform for "get rich quick scheme", it is legitimate and safe for everyone irrespective of age and various background. Steemit is a decentralized social media platform which rewards account users with cryptocurrencies which includes STEEM, SBD, and TRX.
Activities in the block proves that steemit blockchain has the highest number of activities, with greater number of transactions than Ethereum and Bitcoin joint together.
Steemit as a platform is decentralized, which implies that most decisions are made via voting systems on the platform where people with more steem power has greater effect on the voting outcome.
Generally, any action taken with the aim of raising future revenue can be considered as investment. For instance, when making a choice to pursue additional education, the aim is usually to increase knowledge and ameliorate skills in the hopes of eventually producing more income.
For the reason that investing is oriented for the purpose of attaining potential for future increment or income, however a sure level of risk is always associated with investment. An investment may not give rise to any income, or may actually experience lose of value over time. For instance, there is a possibility that one will invest in a company that at the end goes bankrupt or a project failing to materialize. This is the basic way that saving can be distinguished from investing: saving is collecting or bringing money together for future use entailing no risk, whereas investment is the act of leveraging money with the intention of potential future future which entails some risk.
Below are some reason why it important to invest in the Steemit platform:
Higher Investment Returns
Making investment of funds in an asset has to do with a tradeoff as the investor relinquishes the satisfaction experienced from using up the funds for his investment in the present for some higher future satisfaction. Making investment in stock can i two ways result to returns – one through dividends and the other from capital gains. Making investing in a bond can beneficial to the investor in the form of frequent payouts or coupons that are given during predetermined period time. Making investing in real estate is beneficial to an investor through capital gains, rental income and investing in steemit is a sure foundation for endless rewards.
Retirement Plan or FIRE
A reasonable number of people make investment for retirement purposes. Considering that most people depend on their salary income to meet their needs, sustaining their lifestyles after retirement becomes uneasy when one does not have a job. This implies that everyone needs to invest a fraction of his income during working years to make sure certain of a nest egg during years retirement. Although the government and most companies habitually gives a determined benefit pension plan for their employees earlier, in light o this, one has to mostly depend on defined contribution plans.
Large number of young people also intend to retire early as such they need to invest a considerable fraction of their income in order to meet their goals. The “FIRE” movement has also become a major movement amidst millennials. “Financial Independence, Retire Early (FIRE)” is indeed a target that many are making enormous effort to achieve nowadays. Saving a significant fraction as high as 70% of income from a young age can permit one to retire between the age of 40-45 years, in lieu of the 60-65 years. The FIRE movement supports an economical lifestyle both at the time of investing and during early retirement, consequently investing in steemit holds the answers to these issues.
Beat Inflation
Investing is as well imperative to beat inflation. If one doesn't invest money but just leaves it in savings or checking account, the money will experience declination in purchasing power as its value will be eaten away be inflation. Although currently the reported inflation is somewhat low, in the real sense, the actual inflation is completely high as the expenses of education and healthcare are increasing much rapidly than reported inflation.
To guarantee oneself against such a situation, it would be very sensible to start investing in a mix of assets that can beat inflation of which steemit is a thinkable options.
Reach Your Financial Goals
Making investment is one of the major ways in achieving the financial goals for oneself. As an individual advances through life, certain are new financial requirements comes up. Most often, it starts with buying a house. Even if one has house funded a through a loan, there is the obligatory of a substantial down payment. By making investment through a mix of assets, an individual can build up the body required for the down payment.
Another significant investment goal can be the children's college education. With the expensive required college tuition nowadays, a parent can begin making investments for college tuition even-though the children are still much young. In addition to these financial goals, retirement is often a ubiquitous financial goal for people during their working lives. However, investing in steemit undoubtedly guarantees such high profile achievement.
More Reasons To Invest In Steemit
Anonymity
Any desired level of privacy is achievable in steemit because the platform encrypts all the data and account user's details to make certain that no one can access the account owner's identity. In addition, the nodes in Steem network which take part in the confirmation of all transactions can only access user's balance and not their personal data. This readily attainable level of privacy motivates users to engage with cryptocurrencies such as STEEM, SBD and TRX all of which are readily obtainable in the steemit platform.
Widely Accepted
The Steemit platform and blockchain network is not illegal, hence there is restriction and consequently so one can freely invest or carry out exchange transaction.
Decentralized
Unlike what is seen in the centralized financial system where one's account can be targeted and frozen owing to the system bring controlled by a central unit of authority as well as the involvement of third-party, Steemit is a decentralized platform that uses a decentralized blockchain technology which guarantees the security of one's account and at the same time encourages investment.
If you've ever invested in the Steemit blockchain, share your view on your Steem entry Value and that of steem value as at the time of your post.
I am yet to invest in Steemit but being an account holder or user and also being aware of the intrinsic benefits of investing in Steemit, definitely I will some day invest. Meanwhile steem value as at the time of this post is approximately $0.1483 (USD) as indicated below.
What are your possible achievements by investing in the Steemit platform.
Obviously, there are limitless possible achievements that could be made from investing in the Steemit platform, it goes beyond being a curator and earning from curation or voting, investing in Steemit is also beyond a source of passive income. One can actually achieve achieve a reasonable degree of financial freedom any goal set to be achieved. It is all a matter of time, all that is required is patience and the best of one's effort.
This is my entry @xkool24 and @kinkyamiee.
A big thanks to the Financial Security for such an amazing and exposing contest, I wish to use this medium to invite @ifynwa and @preshdan to join and take part in the contest owing to its educational and expository level. I am @hisgeneral.
@hisgeneral, Thank you for participating.