WHAT IS INFLATION?
Great Question, I will share My Interpretation.
INFLATION SIMPLY EXPLAINED
OK, How Do you Explain Inflation to CEO’s & Business Professionals?
How Do you Explain Inflation to Your next-door Neighbor?
How Do you Explain Inflation to College Students?
The answer is: in a very simple and straightforward way.
Business Professionals and Students want to know what Inflation means in Business, not just the definition. Basically, How it Works?To put things in perspective, Inflation occurs when the prices of Products and Services rise across Products/Services in general, and as a result the purchasing power of your money decreases by that inflation rate or sometimes more.
When the Inflation rate is for example 9%, it means that the value of your currency, the Dollar, is falling or losing 9% of its value, and consequently the general level of prices for goods and services is rising by that rate or even more.
In Simple terms, you are 9% Poorer.
How did we come up with that 9% rate? That is a Great question
According to USAFacts, the most common way of measuring inflation is the Consumer Price Index for Urban Consumers (CPI-U), which is produced by the Bureau of Labor Statistics.
“The CPI-U shows changes in the prices paid by urban consumers for a “representative basket of goods and services.” or the most common goods and services purchased on an average month based on detailed surveys of what Americans spend their money on. The urban consumer group represents about 93% of the total US population.”
This makes a lot of sense, simple and straightforward, not that complicated to understand.
Wait, “Representative basket”? What is that exactly, the rest below will explain and change your mind:
“There are four major categories of purchases covered in the CPI-U: food, energy, commodities (like cars and clothes), and services (like rent and healthcare). Not all categories are considered equally when generating the overall measure of inflation — each category is assigned a “relative importance” based on its proportion of all expenditures. Services typically are given the highest relative importance, followed by commodities, food, and energy”.
I know, you are reading this and thinking, What part of simple does this guy Not understand???
Well, I wanted to put things in perspective and be clear, what we all need to be concerned about is this specific sentence “each category is assigned a “relative importance” based on its proportion of all expenditures.”
How are percentages assigned to food, energy, commodities and services? NO such Answer exists, so actually above definitions are intended to make you feel warm, cozy, secure, and taken care of.
The importance of above is in How, You the Regular person, get impacted.
If you drive to work every day, have a long commute, inflation is not 9% but probably much higher than that. Most Products today, compared to last year, are 30%+ more expensive whether you buy them in the store or online. It seems most companies have increased their prices by that magical 30%.
Just for clarity purposes, depending on what you consume most in the mixture of food, energy, commodities, and services that are used to determine the CPI, inflation may be even higher for you.
So, going back to what inflation is, I will look at its meaning for three different segments: Regular Consumers, CEO’s and Business Professionals.
- For Consumers and/or Students of the world, inflation is when you can no longer pay your bills, have to cancel going out because you do not have money left in your pocket at the of the week or month, can no longer go visit your parents and friends because gas is so expensive and you do not have money to pay for that, cancel your dentist appointment because you no longer can afford such bills and the list goes on.
Actually, the common denominator in all above with the inflation of today compared to last year, is a price increase of 30%+ in restaurants, 60%+ in cost of gas, 30%+ in cost of clothes, 30%+ in food, that are taking away over 30%+ of your budget- the money you live on, meaning your income is the same and you are 30%+ poorer and cannot print that money in your dungeon. That is inflation for you.
- Part two, for CEO’s, inflation is laying employees off to compensate for the higher costs of Products & Services they make or buy, however they are not impacted personally as much because the Company covers their expenses, entertainment, travel and so on.
Inflation for CEO’s is cutting your healthcare coverage, your benefits, increasing your workload because it is good for you, meaning they will not fire you if you do two or three jobs. Just simple reality and facts.
- Business Professionals are those in management at the entry and mid-level who live in fear of losing their jobs every day.
Inflation is here and layoffs are coming.
They Feel that inflation of 30%+ in restaurants, 60%+ in cost of gas, 30%+ in cost of commodities that are taking away 30%+ of their salary- meaning their income is the same and they are 30%+ poorer.
Actually, they have to cancel vacations, struggle in paying their kids college tuition, behind on bills/mortgage and the list goes on.
Entry level employees are the ones devastated most, Inflation force them to eat less, cost of transportation will devastate their budget, they will not be able to afford healthcare or medication, cancel vacations and be miserable and depressed. That is inflation for them.
You may have noticed that I added a “+” next to all the numbers as they keep rising Daily.
Why have Fun?
But who needs that, Right?
Live on your Savings and if they don’t exist, Tough Luck.
Just a small sample of the reality of Inflation.
So, That is inflation in the real world.
It is not a word, it is not a definition, it is not a ridiculous formula,
it is Devastating for our Friends and family.
Inflation is not a Percentage Economists and Experts refer to, it is Not a sophisticated and impressive CPU formula, it is How Real People lose their dreams, their homes, their happiness, their Jobs and ability to pay their bills and enjoy the simple things in life.
The fear of inflation resulted in the stock market
Losing about $ 5 Trillion Dollars
in the retirement money of your friends, family and You as well.
That is inflation for You.
As an Entrepreneur, a Business Owner, a Marketing Consultant and a Professor, I was asked quite often recently, What is Inflation? What Do you Think?
One of my professors in college used to say, being aware of the problem is half the solution, at PPI we provide you with the other half of the Solution.
Quite Simple, Redefine your Strategy, Products & Services
and Pricing Strategy.
What is Your Strategy Today?
What We Do:
We Bring Clarity to Your Day-to-Day Operations,
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