What is inflation?? And why is it important for the U.S economy

✦ Inflation is the increase in the prices of goods and services in an economy. When prices increase, the purchasing power of the dollar decreases. The dollars you have today will be able to buy less in the future. That is inflation.

✦ Because of the pandemic, the Federal Reserve stepped in and bailed out the U.S economy to prevent a collapse.

They lowered interest rates to near zero and printed more money than they ever have before. In fact, 1 out of every 5 dollars in circulation today was printed in 2020! This worked to help stimulate the economy, but every action has a reaction, and what we will likely see is increased inflation.

✦ Companies have to increase their prices because the costs of raw materials have increased. (I.e Lumber, steel, oil, corn, grain, etc.) In addition, workers are demanding higher wages and employers will have to pass along those costs to us, the consumers.

✦ What this all means is that we can expect higher prices for goods and services in the future. Rents will go up, gas, groceries, home prices, etc.

They already have, and they will continue to do so.

So this begs the question; “As an investor, what should we do?”

Here are some investment ideas for periods of higher inflation.

The main thing to keep in mind is you want to stay away from fixed dollar investment (corporate bonds, treasury bills, etc.) and invest in hard assets or assets with limited supply such as real estate, gold, and crypto.

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