03 December 2013

What is inflation? Not what you thought it is I bet!

I know we think inflation is understood well. So many government departments banks and what not throw out numbers and tell you how much your money lost value in the last few years or months. Those numbers are just irrelevant. Almost.

Inflation is relative to our spending! How much do things we mostly buy cost us today compared to last year is the real indicator of how much value the money we make lost. Only us and no one else can calculate exactly how much inflation there is. If you don't buy things they use to calculate inflation then those numbers are not relevant. With all the business analytics in place, one day in near future Banks will be able to tell us the exact inflation based on what we spend our money on.

Food, transport and dwelling are our primary expenses. So how much we spend on these will give us a sense of how valuable our money is.

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