Purchasing power: why you should watch it and what it can tell you

purchasing power

Monitoring the purchasing power of money is important. Let’s take a look at what is monitored through the power of money.

Why it matters

We monitor the value of money by purchasing power over time. As a result, we get inflation or deflation, which we then express as a percentage. Purchasing power therefore needs to be monitored in order to know where the economy is heading. Accordingly, the government should take appropriate action.

What you can hear

If you ask someone older than yourself, you will most likely hear that it used to be better and that you didn’t need that much money in order to live your life. But it is true. In 1913, the Federal Reserve Act gave Fed the ability to manage the supply of money. At that time, you could buy 30 chocolate bars for a dollar. Average prices of goods then rose as more banknotes entered circulation, therefore purchasing power declined.

Between 1929 and 1933, the purchasing power of the dollar increased due to deflation and a decline in the money supply. But since then it has been falling. When you imagine how much money you pay for 30 chocolate bars now, it’s a really big drop in purchasing power.

What it could mean

The weakening purchasing power of money can lead us to ever higher inflation. So in 10 years, you won’t be able to buy what you can today for $100. However, the question remains as to where purchasing power will decline and whether it will ever stop.

What you can do

With the weakening power of money, you need to protect your money. One option is to invest. If you would like to start investing but don’t know where to start, we can offer you the opportunity to study with our Platon Trading Academy, which will take you through the business world from the beginning. Whether you are new or advanced, Platon Trading Academy will show you the way and expand your horizons with opportunities that you can then take advantage of.

Source: zerohedge.com

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