Wealth Series Pt 1: Inflation and Debt-Based Economy

This is part 1 of my wealth series so buckle up


You all might just have heard the term "INFLATION" but didnt understand what it really means. No more.


UNDERSTANDING INFLATION:

Lets assume for a moment that the only two commodity in Nigeria is a cup and a spoon - meaning 1 cup and 1 spoon in the Whole of Nigeria. NOTHING ELSE

and we print TWO #50 notes to match this cup and spoon

meaning the first printed #50 is for 1 cup
and the other printed #50 is for 1 spoon

Pretty easy right

Now lets imagine Nigerians decide to be lazy and not produce more cups and spoons BUT instead decided to print an extra TWO #50 notes


But wait a minute, we just understood earlier that in whole of Nigeria, up and down, the only commodity that exists is just a cup and a spoon and we have matched the value of the 1 cup to #50 and the value of the 1 spoon to #50



So what is the need of printing TWO extra #50 notes. Wouldnt the extra #50 notes be useless since it cant purchase anything new since the only commodity in the whole Nigeria economy is just 1 cup and 1 spoon and they have already been matched with price tags already


HERES WHERE THE MONEY MAGIC HAPPENS:

The TWO extra printed #50 notes will slip into the TWO old #50 naira notes SINCE there is no commodity it can slip into


That is to say, the 1 cup and 1 spoon that was previously #50 for 1 cup and #50 for 1 spoon now becomes

#50 + #50(new printed money) for 1 cup = #100 for 1 cup and

#50 + #50(new printed money) for 1 spoon = #100 for 1 spoon

So the #50 cup now becomes #100 and the #50 spoon now becomes #100

What just happened is that the TWO new money created just stole value from the TWO old money which was already matched to the cup and spoon since the TWO new money did not have any commodity to match itself into


So you see, when people complain the price of goods in the market has gone up, they are partially wrong. The price of goods did not go up. It was just the value of money that went down due to too many money in the economy chasing few goods

INFLATION is the reduction in the purchasing power of a currency because there is more of that currency in circulation with little goods which can be purchased with that plenty currency

So the price of goods ACTS like a mop to absorb the plenty 'useless' money in the economy, giving the everyday market man and woman the illusion that prices of goods in the market are going up

NO!

Prices of goods in the market are not going up. Yam did not become more yamful neither did beans become more beansful. Theres no yogurt flavored beans or gold colored yam suddenly. This is the same yam and the same beans your grandfathers ate. So what happened

Its just the value of money going down.

Now you start to see the gears of the world economy turning. Your A-Ha! moment right there


Watch out for part 2 of my Wealth Series: The Debt-Based Economy