Inflation is a complicated topic that still manages to stump many no matter how much research they do. I can definitely say that even with the countless articles I spent reading about inflation some of the causes still manage to confuse me. However with the knowledge I have gained from those articles I will try to express the causes and effects of inflation using a beginners vocabulary.
To start off, inflation happens when a currency’s purchasing power declines overtime. With this comes the rise in price of general goods, which are items that we need on a day to day basis. Something else that comes hand and hand with inflation is also the increasing value of certain investments like stocks, bonds, real estate etc. Now applying this to the real world, according to The Wall Street Journal, the consumer price index rose 4.2% in the last 12 months. In more simple terms, the average price of basketed goods in a fixed market rose 4.2% in the last 12 months.
There is no one event to blame for this inflation but rather a possible series of events that led to this rise. One of these possible events could have been the stimulus checks that the government handed out due to the pandemic. In total with all three rounds of stimulus checks it is estimated that $850 billion were given to United States taxpayers. This could have contributed to the rise in price of general goods because it was basically free money that was given to the citizens so the demand for certain products would skyrocket. And obviously when demand skyrockets so does the price for these certain products.
Another interesting theory on the causation of inflation is cryptocurrency. Daniel Kwak explains that with so many companies starting to accept crypto as a form of payment, the use of the US dollar is already decreasing. Ultimately this will cause the value of the US dollar to decrease as everyone will be using more effective methods of payment.
To sum it up, inflation has been very present in our modern society and there is no one event to blame for it. Instead of one event, there have been a multitude of random events that possibly caused inflation that no one would have seen coming. Obviously as discussed above these events were the accepted use of cryptocurrency and the global pandemic.