Crypto Glossary

Inflation

Inflation is the rate at which the value (or buying power) of a currency drops over time. The result is that the prices of goods and services in the economy rise.

Inflation is why something like a loaf of bread used to be able to be purchased for a nickel whereas now it will cost several dollars. It isn’t that bread became more expensive. It is that the value of the US dollar has dropped. This mean it requires more currency to buy that same loaf of bread.

Inflation happens because the government or central bank that controls it is constantly creating more currency. This is often referred to as “printing” more money, although in real life very little is actually done by the physical printing of bills. Most “printing” is purely digital now. They basically create more “money” out of thin air by basically typing it into a computer. Every time there is a new loan made (whether to a person or a government), a new debt is created which thus creates more currency.

Creating more currency creates inflation.

Inflation is very commonly falsely reported by central banks to make it seem less than it is. But, inflation has the effect of robbing people of their savings. While it might look like your bank balance is the same and you didn’t lose any money in your savings account, inflation means the actual buying power of your savings drops over time.

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