How High Inflation Affects The Average American

June 17, 2022 | Louis Tully

inflation  

Inflation is rising and it is affecting everyone. The average American is most affected by inflation because the value of the dollar drops, and their purchasing power is reduced. It can also cause problems by creating more unemployment and causing even more inflation to follow.

This is how rising inflation affects you and your family.

Ways That Inflation Affects The Average American

It Reduces Purchasing Power

One of the most significant ways that high inflation impacts the average American is that it reduces the purchasing power that they have. This is implied by inflation’s definition, but it needs to be clarified. When inflation happens, the prices of almost everything rise. This means that the dollar can’t buy as many things as it used to. Some of these items are things that consumers can eliminate from their budget to save money.

However, some things, such as food, fuel, and housing, are necessities that consumers usually cannot go without. This is why economists tend to focus on the prices of these items to determine “core inflation”. This is seen as a more reliable way of measuring the rate of inflation and its impact on the economy and the average American.

It Changes How People Spend And Invest

Another one of the ways that high inflation affects the average American is that it encourages them to spend more. If prices are only going to keep rising, then you might as well buy the stuff you need now rather than wait for tomorrow when your cash will have less value.

Inflation also tends to inspire people to invest more money. This is because the value of stocks will generally increase over time. This means that investing in the stock market is a good way to help you weather the storm of inflation.

It Causes More Inflation

Unfortunately, inflation tends to cause more inflation. This is because people are spending their money more quickly to get the most value that they can out of it.

This will often lead to people hoarding essential items rather than buying things when they need them. This makes those essential household items scarcer, which further raises the prices on them, leading to inflation in other areas of the economy.

Unemployment Rises

Another way that high inflation affects the average American is that it tends to lead to more unemployment. When economic growth is slow, and inflation is high, rising unemployment rates are usually one of the first signs.

This is often referred to as “stagflation”. This is a situation that characterized the economic struggles of the United States and the United Kingdom for much of the 1970s. This created a divide between supply-side economists and Keynesian economists. This resulted in the 1980 election of former U.S. President Ronald Reagan.

It Can Weaken The Dollar

Related to the previous point about reduced purchasing power, periods of high inflation tend to weaken the value of the dollar. However, this is usually not the result of inflation so much as the cause of it.

Like most countries, the United States imports the majority of its goods. When the value of the dollar drops, Americans have to pay more for these goods.

However, this does not mean that countries that export goods to America are necessarily raising the prices of these goods. It just means that America has to pay more to import them, which leads to inflation in other areas of the economy.

Getting Financial Help

Inflation can put a strain on your financial situation and make it harder for you to afford essential items. If your emergency savings fund is hurting because of rising prices, you still need to have a backup plan for how you will cover an urgent expense.

older man with cash

One option that you can consider in situations like this is applying for help in the form of title loans from New Mexico Title Loans, Inc. This is an option that you can consider to help you get the quick cash you need to cover your urgent expenses.

Title Loan Advantages

There are several advantages that come with applying for title loans from New Mexico Title Loans, Inc. These advantages include:

  • There is no store visit required
  • You can keep your car while you repay the loan
  • You can have cash quickly deposited into your account
  • You can apply with good, bad, or nonexistent credit
  • A store representative can come to you at a location of your convenience

Final Thoughts

High inflation affects everyone. It lowers purchasing power, leads to more unemployment, leads to food shortages, and even creates more inflation. Get a loan to help you through these hard times.

Note: The content provided in this article is only for informational purposes, and you should contact your financial advisor about your specific financial situation.

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