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The Causes of Inflation in the Year 2011 and Beyond

Updated on August 16, 2011

Inflation Affects Everyone

Hyper Inflation has happened before in the past, thankfully it was usually relatively shortlived and not global in nature.

In uncertain economic times it pays to be prepared in your financial planning so I've assembled the information that helped me understand the causes of inflation.

The Critical Inflation Factors

The global inflation rate is affected by large number of factors ranging from economics, demographics, government policies and even the weather, among other things.

Here are the most obvious factors: 

  • Scarcity or constrained supply of resources including clean water, food commodities & energy resources.
  • Increase demand of resources from increase in global populations and increase in affluences (and wastage) and standard of living.
  •  Increase global supply of money as an aggregated result of loose monetary policies from the US and other key economies.

So What Can Go Wrong to Cause Accelerated Inflation Rates?

Its critical to be prepared especially when it deals with wealth protection. Some of the key trends that would cause accelerated inflation is and will be the "kicking-the-can-down-the-road" loose monetary policy (printing money on steroids), the rise in commodity prices, strategic currency devaluation, and the rise in trade protectionism.

The increase in erratic weather patterns is likely to wreak havoc in the global food supply. The worst part is that these trends can potentially reinforce each other and also with the rising inflation rate in a vicious cycle to create a "perfect storm" of global hyperinflation. For example assuming global climate change accelerates, it will primary affect food production leading to inflated food prices, with secondary economic effect of interruptions in economic activities, disaster relief and prevention measures. These events might then lead to increase in protectionism, increase possibility of conflicts & unrest, even more printing of money. Thus the vicious reinforcing cycle spirals gaining strength by feeding on each cause and effect.

I sincerely hope it will not come to that and hope that the increased awareness of these very real inflation dangers might help avert it.

Learn More about Inflation with these Books

An episode of Duck Tales dealing with the negative consequences of inflation

What will Inflation be like in 2011?

Its a fool's game to try and predict the future. So one of the best approach is to understand the key factors at work which in the case are the key causes of global inflation.

For what its worth, what I will be watching out for would be the trends in drastic climate changes, governments protectionism & monetary policies, global social unrest, supply trends of global natural resources. 

In terms of what-ifs for worst case scenarios, If unemployment rates rises coupled if rising inflation, then the economy might go into Stagflation which is a bigger can of worms.

Here's to safely navigating our financial future and to stay vigilant to guard and grow our personal wealth.

Want to Learn More About World Inflation?

Rising prices is something that concerns everyone. Business owners will worry about their cost of production and fluctuations in currency fluctions. While the hardworking employees sees their real income shrinking and retirees on fixed incomes want to find ways to protect their hard earned savings.

Its not possible to put everything about inflation in just one page. Do visit our Inflation World Website to find the best timely information on this crucial topic. 

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