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The Dangers of Inflation

By Joz L :  How To  |  Financial Freedom  |  Smart Investor  |  Get Rich  |  Asset Classes  |  Forex Trading  |  Reviews

Inflation is an invisible tax to your savings. Take the first step to understand the dangers of inflation to your cash flow over time. When inflation goes up, you are actually paid more for all items you buy and these inflationary increases happen regularly.

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Inflation is refers to a situation where the rising prices of goods and service reduce the purchasing power of consumers. The most common price index is CPI or consumer price index, which measures increases of basic consumer goods and services.

Generally there are two main sources of inflation, demand-pull and cost-push. The latter, also known as supply shock inflation suggests that shortages or shocks to the supply of a certain raw materials have caused the price of goods to increase.

Inflation is generally acceptable if price increased resulting from economic growth. The impact of inflation is becoming a key concern for people only when the inflation rate goes beyond a certain predetermined range by government, and it spiral out of control. An average of yearly inflation rate is about 3% depend on each country situation. Currently spiralling food, oil and raw material prices are leading to growing inflation fears.

For example, the lower returns from your bank deposit savings and higher food price mean that you will need more money to buy the same amount of goods, and your deposit generally don't reap interest fat enough to cover the increasing cost of foods.

If you think that parking all your hard earned money in a low interest saving accounts a safe option, think again the dangers of inflation is guaranteed to destroy your bank fixed deposit savings capital in the long run.

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Everybody wants to be rich or at least financially secure. However, today more and more people are finding it harder to keep their head above water financially.

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        When it comes to investing, your returns depend on the risk appetite you take. Learn how to grow and invest your money wisely into a set of diversified financial market asset classes allocation, commodities, forex, stock options or insurance policy to protect your retirement capital from dangers of inflation. This is especially important when you think about long term saving for early retirement as inflation effectively reduces the amount of goods and services your money can buy over the long term.

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