Inflation tax

wages-inflation-mar-2022

“By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily,” John Maynard Keynes, “The economic consequences of the peace” Inflation tax is an implicit tax on nominal assets, such as cash, bonds and …

Read more

What is the difference between depreciation and inflation?

pound-sterling-er-index-1980-2020-with-depreciations

Readers’s question: What is the difference between depreciation and inflation? Depreciation refers to a fall in the value of an asset. A depreciation of the exchange rate means a currency becomes worth less than others. For example, the Pound sterling falls in value against the dollar/euro/Yen. This graphs shows that the value of the Pound …

Read more

Understanding exchange rates

Factors affecting exchange rate

A summary for understanding exchange rates. Factors that affect exchange rates and the impact of exchange rates on the economy. Terminology Depreciation/devaluation – fall in value of exchange rate – exchange rate becomes weaker (see also: definition of devaluation and depreciation) Appreciation – increase in the value of exchange rate – exchange rate becomes stronger. …

Read more

Exchange rate movements – Sterling, Euro and Dollar

sterling-effective-exchange-rate-1980-2005

The effective exchange rate measures the value of a currency against a basket of other currencies. This exchange rate index is usually trade-weighted to take into account the relative importance of other currencies. When looking at the effective Sterling exchange rate we compare the value of Sterling against our main trading partners – The Euro, …

Read more

Do rising oil prices cause recession?

oil-prices-2022-recession

Periods of high oil prices frequently lead to periods of recession shortly after. There are two main reasons for this. Higher oil prices reduce disposable income leading to lower spending. Higher oil prices push up inflation causing Central Banks to increase interest rates. Oil prices and recession With oil prices rising above $100 because of …

Read more

How inflation affects the stock market

global-inflation-rate-1981-2021

Summary – Periods of high inflation usually lead to lower returns on the stock market because higher inflation is likely to lead to higher interest rates, lower economic growth and lower dividends. Impact of high inflation on share prices If the inflation rate increases, this will make investors wary for a few reasons. Firstly, if …

Read more

How inflation affects your cost of living

cpi-inflation-march-2022

Inflation measures how much the price of goods and services have increased over a period of time; and will have a significant impact on changes in the cost of living. An inflation rate of 5% means that on average the typical household basket of goods (e.g. food, TVs) and services (haircut, restaurant meal) is 5% …

Read more

Item added to cart.
0 items - £0.00