The first thing to acknowledge is that inflation fundamentally arises from an overabundance of CASH and a relative scarcity of RESOURCES.
We’ve seen both of these occur over the last 1-2 years.
The money handouts that occurred during COVID were not really “free money” and had to be repaid at some point.
The relative abundance of money versus resources it can be used to purchase means that there is an oversupply. When something is in oversupply its value goes DOWN.
This is of course due to the laws of supply and demand.
Central Banks can control money supply in two ways:
- Quantitative easing. (money printing)
- Interest rates.
Increasing interest rates will make borrowing less attractive as the repayment rate (interest rate) is much higher. This means it is more expensive to borrow money.
This means it is much less lucrative for individuals and companies to obtain credit (borrow). They have less money to spend and therefore money supply in the economy decreases.
Interestingly, 97% of all capital is actually credit. You can imagine how much of an effect this has on money supply when it dries up.
Inflation is often called “Taxation without consent” as it allows the Government to reclaim the value of our wealth without us giving the “ok”.
We CAN’T control inflation but we CAN control how we protect our wealth against it. It starts with educating ourselves on money and how it works.
The point of this group is to provide that information and thus empower dentists.
*NOT FINANCIAL ADVICE