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Inflation and money – Can this result in increased debt

At the beginning of the year the Federal Reserve has been worrying about the inflation of the nation being too low. They feared that too low an inflation was going to have higher negative impact on the nation’s economy just as high inflation can negatively impact the economy. However, with time, the inflation has again started to rise and now people and the political personalities, the economists and everyone else fears that this rise in the inflation is now going to hit the nation’s economy once again. As a result of this inflation, the costs of all kinds of items are rising and as a result of this more and more people are falling deeper into debt. Even if they are trying to debt relief and pay those off to become debt free, there seems to be no real respite from debts.

The increasing inflation

The Consumer Price Index for All Urban Consumers or CPI-U is seen to have increased by 0.4 percent in the month of August. This was received from the U.S. Bureau of Labor Statistics as has been reported on September 15. In the last 12 months, the entire items index is seen to have increased by 3.8 percent before the seasonal adjustment.

The seasonally adjusted rise in the entire items index is seen to be a broad based one, with this there is also a continual increase in the indexes of items like the gasoline, the food items, on shelter, and also on apparel. The gasoline index is seen to have risen for as many as 12th time in the just 14 months and this has also resulted in a 1.2 percent increase of the energy index. On the other hand, the food index too was seen to rise by 0.5 percent, which is considered to be the largest increase since the month of March.

The shelter and the apparel are being considered to be the biggest contributors in the increase of index, even though indexes of most of the major components too have posted increases, including those of the already used cars and other vehicles, the medical care items, also household furnishings and those of recreation, and things like tobacco and on personal care. However, new vehicles index which is seen to remain unchanged for second month on a continual basis is considered to be an exception.

This is leading to increased national debt and also increased debt amount with regards to the people. Now, it is known that the government has the ability to print more money and use those to pay off debt. However, the fact the printing more money can result in increased inflation cannot be denied. This will result in further reduction of the value of money and so the debt situation will continue till then.

The situation is so bad that the 12-month change in items index has edged up and now it stands at 3.8 percent. On the other hand, the 12-month change on all items less food and the energy has reached 2.0 percent and this has happened for first time since the month of November of the year 2008. The energy index too has risen to 18.4 percent through the last year and the food index is said to have increased to 4.6 percent.


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samantha Brook

samantha Brook