A lot of investors love watching product launches since that’s the best time to see how the economy works in full effect. It’s also one of the greatest examples of how the law of supply and demand works. Let’s look at the product launch for the PlayStation 5.
Immediately after it was released, it was sold out. Of course, there was a lot of marketing involved in it. The price was justified. However, some people saw this and thought that a business opportunity was present. You can click here to read more.
They bought more than 20 units and then resold them for 5x the price on eBay and Amazon. This is how inflation works in the real market too. When consumers are in the mood of spending money, the demand for products rises, and prices start getting higher.
This creates a gap between the supply and the demand. Inflation is one of the weirdest phenomena’s that people don’t know how to deal with. Everyone knows that a decade ago, you could fill a basket with more groceries than you can today, but they rarely think about it.
It’s just another part of life, and they blame the government for raising the prices. Of course, that affects prices too, but inflation will be there regardless of the governing bodies. It’s the way the system is built. When you have a central body that’s responsible for the entire monetary supply, it’s easy to print more money than is need it and use it for personal gains.
Inflation is a phenomenon that’s built into the system, and it’s going to keep rising into the future. Now that more people are looking into personal finance, they’re asking for higher salaries to keep their current living standards in the future. But, when people earn more, that causes the prices of services and products to rise too. This spirals into a loop as a chain reaction, and the economic trends keep rising while the standards remain the same.
Can precious metals save you?
Gold and the dollar were in a close relationship ever since the latter was invented, all the way until the 1970s. Every printed piece of paper that had the face of a president had to be backed by a number of precious metals in a safe. Since the United States was the leading economy after the World Wars, all other countries based their currencies on the dollar, while it was backed by a large supply of gold.
When the entire world trusts you, it’s easy to print more money than you actually have and steal a bit of their gold too. That’s exactly what happened. It took a few decades for other countries in the world to lose faith in the dollar, and they started to ask for their gold back. Follow this link for more information https://www.barrons.com/articles/social-security-is-in-line-for-biggest-percentage-bump-for-inflation-in-40-years-51629489389.
At that time, Nixon decided to abandon the gold standard and kept all of the reserves. Even though it’s a bad political move, this ensured that the United States of America stayed as the leading economy. However, when you base a currency on the faith people have in government, you’re adding a lot of inflation into the mix.
That’s why most investors nowadays are keeping all of their savings in physical gold. No one can take away the power of this precious metal, and the value will keep rising with time. Of course, it doesn’t give you dividends, but that’s why IRAs exist, as well as mining company stocks. These options work as a safe haven against inflation, and you can think of them as deflationary assets.
How is inflation beneficial if you have a lot of gold?
Whenever the value of the dollar goes down, the prices of precious metals skyrocket. If you’re someone who doesn’t have any precious metals, inflation will be a fatal strike on your finances. On the other hand, if you’re someone who has invested a lot of money into metals, this is the perfect time to sell.
This situation will increase the prices of your assets, and you can start selling bits of your portfolio. New investors always want a piece of the pie, and they will have to pay more money to get those assets from you. Gold can be thought of as the retirement metal which keeps giving. Another way to profit from these economic setbacks is to buy indexed bonds.
When you think about it, inflation is the main reason that pushes investors to add a bit of risk to their portfolios. It forces them to put their money in places where higher returns await, and this phenomenon ensures that more people are investing rather than conserving their cash.
However, this also pushes people more towards instant gratifications. It’s much better to spend your money now rather than later since the value will decrease as time passes. That’s why most countries are struggling to make the percentage well-balanced and in the optimal range.
At the moment, that range is two percent. Seeing that the spending of the United States was not ideal in the last year, it can reach up to five percent in the following year. In order to evade the havoc that’s about to go down on the economy, you need to have assets that will be valuable even in the case of hyperinflation.
Generally, rising prices are to be expected, but not when they happen every month. You need to put time and energy into researching the economic fundamentals and put your money where it can grow.