In the study of fiat as well as cryptocurrencies, it is essential to know that how inflation has impacted the civilized countries that are using fiat currency. Read out to get a tinge of Inflation as well as detailed explanation of its types.
Inflation is one amongst the many negative terminologies of the market which affects the government bodies, investors as well as consumers. Inflation completely depends upon the economic conditions of a country. Inflation can be defined as a considerable increase in the moderate level of prices of commodities/goods as well as services in a particular country. Inflation can be measured by determining the change in annual percentage. The pricing of goods and services increase with time in the inflation-duration. It means that the value of money reduces during inflation.
Inflation & Fiat Money:- Fiat money is not intrinsic in nature that is the reason why it is not at all related to commodity money. It attains its value from government decree so that it can be legal tender. Fiat currency has its value because people living in a country put faith in the hands of the government. Fiat currency gets highly affected with inflation. You can witness many currencies that have lost their value due to hyperinflation, defunct government bodies, redenomination and much more. Inflation basically means money being valueless. As all the civilized countries are using Fiat Money, this is a matter of concern for economists as well as consumers. The above issues can create hyperinflation in future which may prove to be actually troublesome and can affect other countries around the globe too.
Types of Inflation
There exist four basic types of Inflation which are defined by their acquisition speed. After these 4, there come some more extended types of inflation which are must to be known by everyone.
1. Creeping Inflation
It is also known as mild inflation. Creeping inflation is generated when yearly there is approx. 3% or lower price rise. As per the Federal Reserve, when the price rises 2% or lesser, then it actually supports the economy of a country. Such inflation creates a mindset of people that very soon prices will rise and it amplifies the demand. We can simply get that creeping inflation helps in boosting up the economic performance of a country.
2. Walking Inflation
This inflation is caused when there is an annual price rise of 3-10%. When walking inflation comes, people start buying too much and in turn, dealers of sellers cannot supply according to the increasing demand.
3. Galloping Inflation
As soon as inflation exceeds 10%, it’s called galloping inflation. In this inflation money loses its value very quickly and due to this reason, foreign investors limit themselves to invest in that country. The economy remains no longer stable at the time of galloping inflation.
Stagflation is when economic growth is stagnant with an available price inflation. It can be understood with the examples when prices increase in the market without any hike in demand.
6. Core Inflation
Core inflation is caused due to increase in pricing except for food as well as energy. Because due to increase in gas pricing, food price also amplifies.
Deflation is totally contrary to inflation. When prices are reduced and the asset value gets affected, then deflation arises. If neglected, then deflation may turn into a recession.
8. Wage Inflation
Wage inflation arises when you have to pay your workers more than that of the amount coming into your hand. The first situation to generate wage inflation is the rare availability of workers and the other one is when workers make union and team up together to plea for increased wages.
9. Asset Inflation
An asset inflation can take place in individual asset category. These categories are housing, gold, and oil.