The Dangers of Inflation

The article Time To Pop The Party, written by Bernard Baumohl, demonstrates that inflation is a inevitable occurrence in our society. Even though the United States economy continues to grow and prosper it still faces the problem of inflation. Some people describe inflation as the decrease in the value of a doller. During a period of inflation the general price rises. In its extreme form inflation can have catastrophic effects on a nation. No matter how much a nation may thrive economically it still must face the problem of inflation. As shown in the article Time To Pop The Party the United States is under going a unprecedented economic time of prosperity. The United States has been increasing its gross domestic product every year for the past eight years, which is the longest in the history of the United States. Consumer spending has increased and unemployment is at a record low. After all this economic success our nation still under goes the problem of inflation. Inflation may be caused by several different reasons. Inflation may be a direct result of goods and services being in great demand and the economy not being able to satisfy this demand which is called down-pull inflation. Another reason for a rise in the level of prices is when the cost of doing buisness is increased which is called cost-push inflation. When the Federal Reserve raises the rates of interest financial markets increase their prices. Inflation can have disastrous effects on any economy as demonstrated in Germany following World War one. The year before the war 4 marks could be exchanged for one doller. But after the war 4,000,000,000,000 marks were neccessary in order to exchanged for one doller. As a result of this drastic inflation the German people needed a barrel full of money to buy a single newspaper. People who depend on fixed incomes are hurt by inflatio…

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