Open inflation

Inflation is a characteristic of almost every economic system, with various factors influencing inflation. Depending on the situation, this is referred to as hidden, backed-up or open inflation. Open inflation is reflected in a generally recognizable rise in consumer prices.

Definition / explanation

Basically, the term inflation is equated with the term inflation. In the case of open inflation in particular, this is most likely to be recognized by the consumer in that the prices of goods and goods rise in relatively short time intervals.

The annual inflation rate is an index for the value of the generated money and at the same time a symbol for the economic development of a state or region in relation to its foreign trading partners.

The rising price level leads to a demand overhang, since the consumer on the one hand needs the increasingly expensive products and on the other hand counteracts the feared devaluation by quickly spending the money.

Durch den dabei entstehenden Nachfrageüberhang verteuern sich wiederum die Produktions- und Manufacturing costs. Daraus kann sich eine sich nach oben immer schneller drehende Preisspirale bilden, die letztlich zu einer Hyperinflation führen kann, vor allem dann wenn die Geldmengensteuerung durch die Notenbanken des jeweiligen Staates versagen.

review - In Germany such hyperinflation occurred in the Weimar Republic in the twenties of the last century.

Beneficiaries of open inflation

debtor - First and foremost, it is the debtors who, for example, took out a loan at times of low inflation and are now paying it back with money that is of less value on the market.

Country - The state also benefits from this, in that the national debt is reduced and government revenues rise.

People and companies - People and companies who previously invested their money in real assets also benefit from inflation, since the nominal value of real assets, such as real estate, increases.

Open inflation is a fluctuation in the value of money and is subject to political and economic influences. Accordingly, the benefits for the respective beneficiaries of inflation are very different.

Certainly the state benefits most from inflation due to the large amounts of money and interest that are handled here, while it hardly pays off for a normal borrower and even an owner of real assets will be less able to make direct profit from an inflation.

Only the value date area offers a greater opportunity if inflation affects the exchange rate of the currency.

Sufferers of open inflation

Salaried employees - Salaried employees record a real loss in the event of open inflation, as a fixed monthly income usually does not include an inflation adjustment.

creditor - Creditors and investors alike experience a loss due to the falling value of the interest income. Here, too, it always depends on the respective magnitude in which interest on loans and financial investments is traded. This will certainly be a considerable amount for banks, for example.

Summary

  • open inflation is evident from price increases
  • differs from price-lowering deflation
  • Profiteers: mainly debtors and the state
  • Victims: salaried employees and creditors
Was the explanation to "Open inflation"Helpful? Rate now:

Weitere Erklärungen zu Makroökonomie