No matter which country we live in, most of us have a tendency to constantly complain about how bad the economy is and how expensive everything is. In most cases, this complaining is justified.
However, in my unpopular opinion, I believe inflation is actually good in the long-term. Of course, inflation causes prices of essential goods and services to rise and that can lead to a lot of financial stress for most people. So why do I say inflation is good?
Comparing prices vs your lifestyle
There are two ways to measure the effects of inflation:
1. Comparing the current prices of goods and services to a previous period. For eg: A dozen of eggs might cost 40% more than their cost from five years ago. That’s an absolute measurement of inflation.
2. Comparing the current standard of our living to a previous period. For eg: You might be living a much better lifestyle today as compared to 5 years ago. That’s an intangible measurement of inflation.
In my opinion, the second way is a much better indicator of the effects of inflation on our lives. In most cases, our lifestyles would have improved over time, thanks to inflation.
Ask these questions to yourself
- Are you living a better life now than you were living before?
- Do you have more savings and investments now than before?
- Are you earning more than before?
- Do you spend more on leisure activities like vacations, dining out, movies, etc. more than before?
If you answered yes to those questions then it’s quite evident that inflation has done more good to you than bad. Also, when I say “before” in the questions above a good timeframe for comparison is 5 years.
It might seem counterintuitive at first but a healthy level of inflation (~2%) is actually quite very good for inducing growth and prosperity for everyone.
