Let’s divide the game into 3 hours.įirst Hour: Every time you and your friends began a new game of Monopoly, everyone started off with a little money. Now that I have your attention, let’s talk about the game that beautifully illustrates capitalism. But what does Monopoly have anything to do with this? Clickbait title? Oil is produced and sold in Dollars (even outside the US), making the Dollar an important reserve currency, that all countries need to maintain large stocks of. Or in today’s parlance, think of it as – America tested positive for COVID and your country has been an ‘immediate contact’. Should I still worry about the Fed and Dollar supply? When America sneezes, the world catches a cold. The Fed and other Central Banks can print as much money as they want. The US left the Gold Standard system in the early 1970s and now the US dollars in the world are not tied to a limited asset (like gold). This sounds preposterous! Is the Fed even allowed to do this (print money out of thin air)? Actually, yes. Your bank balance remains the same but your shopping cart gets smaller. Repeat after me – When more money chases few goods, you get inflation. In 2020 alone, 20% of all US dollars in existence were created (out of thin air – for stimulus payments). This was to boost the economy post the financial meltdown. Since 2008, the Fed has printed almost double the amount of dollars in existence. Take a look at the graph above to understand just how much money has been printed in the last two decades. To make the government of the day look good. Then why does the Central Bank print more money? To boost the economy. When more money chases few goods, what do you get? Inflation. Every time the Central Bank (say Federal Reserve) prints money, the money in your wallet loses value.īut why? Because even though more money is printed, the number of goods in the world still remains the same (atleast in the short term). So let’s take a look at one of the earliest board games that you've played to explain a boring but critical subject – Inflation! Inflation (simple definition) = Your money loses value you can buy less things with it.īut why does money lose value? A leading driver is monetary policy. Monetary policy, fiat money, legal tender, gold standard – these are just complicated jargons for most people. Inflation has always been an unsexy topic.
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