Beautiful Virgin Islands

Tuesday, Jun 03, 2025

The return of the inflation beast

The return of the inflation beast

Investors are wary recession may be on the horizon. Recession is never good for investors or business, as recession means a fall in profits and revenues, which in turn impacts dividends and share prices. Recession means business contraction and job loss.
Fears that Stocks may be entering a long Bear Market are not farfetched. And business and consumer confidence has taken a hit, as prices have risen everywhere. Rising inflation accompanied by pessimism is back.

And Rising Inflation is the New social and economic Bogeyman. Inflation is put at 7% by UK statisticians and is rising. Pundits expect inflation to hit the 10% mark.

OK! The prices you and I pay in the shops, gas stations, and restaurants, rise by greater than the inflation rate.

The Inflation Rate is simply a figure decided by statisticians and mathematicians using specific products as benchmarks for their numbers. For example, a tin of milk costing $1 20 today costs $200. That is a 67% increase in price. Gas costing $3 00 a gallon today costs $5 25. That is a 75% increase in price. So the prices we pay in the shops far outpaces the rate of inflation which is put at 7% today. The preceding is simple voodoo math however and should be taken with the proverbial pinch of salt.

Now the talk from global pundits is that we are on track for a recession: economic contraction.

Recession will come with staggering increases in interest rates that have already started to increase with the US Federal Reserve and the Bank of England increase in base rates recently.

Central banks increasing interest rates and base rates is a money management tool. It is a mechanism that attempts to tame overheating economies that move from sustainable growth to unsustainable boom. Rising inflation is an indicator that an economy is becoming unsustainable and that there is danger around the corner.

Interest rate increases are an attempt to tame rising inflation before it becomes an even more dangerous monster. Recession driven by increased base rates is frequently the price to pay to tame high inflation.

The Federal Reserve and Central banks are in a dilemma from what can be termed the inflation paradox: increase interest rates too aggressively and trigger economic recession, or increase them more anemically, and probably fail in taming inflation.

Inflation is considered a worse problem than slow or contracting economic growth – recession- as the effects of inflation inflict greater harm on an economy structurally than recession.

In fact, high inflation can precede recession with recession the mechanism by which inflation is brought under control. However, this is not always the case, and inflation can be accompanied by recession: stagflation is a double whammy.

Stagflation is similar to Economic Depression in that a contracting economy is further saddled with rising prices. There is an increase in poverty, bankruptcy, and unemployment. The economy is structurally in bad shape.

In an inflationary environment money loses its value; inflation hits the poor hardest; the cost of living rises; the cost of borrowing increases.

High inflation is a common enemy: it increases the cost of living; reduces the standard of living; impacts the quality of life; drives fear and uncertainty; and diverts away from good economic and social planning.

On the other hand, low inflation maintains the quality and standard of living by keeping prices at sustainable levels. This enables sustainable economic growth and management.

And that is why low inflation is a good thing.
Newsletter

Related Articles

Beautiful Virgin Islands
0:00
0:00
Close
Harvard Urges US to Unfreeze Funds for Public Health Research
Businessman Mauled by Lion at Luxury Namibian Lodge
Researchers Consider New Destinations Beyond the U.S.
53-Year-Old Doctor Claims Biological Age of 23
Trump Struggles to Secure Trade Deals With China and Europe
Russia to Return 6,000 Corpses Under Ukraine Prisoner Swap Deal
Microsoft Lays Off Hundreds More Amid Restructuring
Harvey Weinstein’s Publicist Embraces Notoriety
Macron and Meloni Seek Unity Despite Tensions
Trump Administration Accused of Obstructing Deportation Cases
Newark Mayor Sues Over Arrest at Immigration Facility
Center-Left Candidate Projected to Win South Korean Presidency
Trump’s Tariffs Predicted to Stall Global Economic Growth
South Korea’s President-Elect Expected to Take Softer Line on Trump and North Korea
Trump’s China Strategy Remains a Geopolitical Puzzle
Ukraine Executes Long-Range Drone Strikes on Russian Airbases
Conservative Karol Nawrocki wins Poland’s presidential election
Study Identifies Potential Radicalization Risk Among Over One Million Muslims in Germany
Good news: Annalena Baerbock Elected President of the UN General Assembly
Apple Appeals EU Law Over User Data Sharing Requirements
South Africa: "First Black Bank" Collapses after Being Looted by Owners
Poland will now withdraw from the EU migration pact after pro-Trump nationalist wins Election
"That's Disgusting, Don’t Say It Again": The Trump Joke That Made the President Boil
Trump Cancels NASA Nominee Over Democratic Donations
Paris Saint-Germain's Greatest Triumph Is Football’s Lowest Point
OnlyFans for Sale: From Lockdown Lifeline to Eight-Billion-Dollar Empire
Mayor’s Security Officer Implicated | Shocking New Details Emerge in NYC Kidnapping Case
Hegseth Warns of Potential Chinese Military Action Against Taiwan
OPEC+ Agrees to Increase Oil Output for Third Consecutive Month
Jamie Dimon Warns U.S. Bond Market Faces Pressure from Rising Debt
Turkey Detains Istanbul Officials Amid Anti-Corruption Crackdown
Taylor Swift Gains Ownership of Her First Six Albums
Bangkok Ranked World's Top City for Remote Work in 2025
Satirical Sketch Sparks Political Spouse Feud in South Korea
Indonesia Quarry Collapse Leaves Multiple Dead and Missing
South Korean Election Video Pulled Amid Misogyny Outcry
Asian Economies Shift Away from US Dollar Amid Trade Tensions
Netflix Investigates Allegations of On-Set Mistreatment in K-Drama Production
US Defence Chief Reaffirms Strong Ties with Singapore Amid Regional Tensions
Vietnam Faces Strategic Dilemma Over China's Mekong River Projects
Malaysia's First AI Preacher Sparks Debate on Islamic Principles
White House Press Secretary Criticizes Harvard Funding, Advocates for Vocational Training
France to Implement Nationwide Smoking Ban in Outdoor Spaces Frequented by Children
Meta and Anduril Collaborate on AI-Driven Military Augmented Reality Systems
Russia's Fossil Fuel Revenues Approach €900 Billion Since Ukraine Invasion
U.S. Justice Department Reduces American Bar Association's Role in Judicial Nominations
U.S. Department of Energy Unveils 'Doudna' Supercomputer to Advance AI Research
U.S. SEC Dismisses Lawsuit Against Binance Amid Regulatory Shift
Alcohol Industry Faces Increased Scrutiny Amid Health Concerns
Italy Faces Population Decline Amid Youth Emigration
×