Eroding our Purchasing Power

Eroding Purchasing Power

Sometimes it's hard for people to understand the concept of inflation. I think this is partially the reason why when Economists talk about the financial situation of a country, most people tune out thinking it's not that relevant to their life, but of course this is not the case.

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I've also found quite common for people who live in USA to think that they are not affected as much by inflation. Maybe within the communities of crypto this is not the case(most are in crypto because they understand this), but to those who participate of the more common elements of economy, these facts, are completely missed. It's almost as if most operate with a short term memory and can't possibly remember a can of soda costing 0.75 cents just a decade ago.

Having the somewhat unusual life of a working musician, I travel a lot back and forth between USA and Brazil, and this gives me a different look into how the two economies interact. As you might guess, inflation in Brazil is considerably higher, but attempting to think in dollars while working with Reais (the Brazilian currency) is very ineffective to measure purchasing power and vice versa.

Worker salaries are adjusted much faster in Brazil due to the higher inflation (or should, at least) with the idea of keeping the purchasing power of the people within a healthy range while promoting spenditure. However, If hyperinflation takes place eroding the purchasing power too fast, the economic death spiral becomes extremely obvious.

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This delicate system is constantly being corrupted. Banks acting as governments get to do as they please, making up for their mistakes by simply printing more money. How do get away with it? Where does the "money" come from, the overprinting that is? From the people, from their purchasing power.

This is precisely why I believe now more than ever, that despite all the challenges we are facing today on the cryptocurrency ecosystem, we are interacting inside the right system. The only one I'm aware of that has the potential of removing the ability for manipulation and theft (that is exactly what it is) from the people who participate of the economy.

I decided to write about this today, because I think this bit of knowledge is very important, and those who are feeling negative about cryptocurrencies should do an extra effort to remember this. Don't misunderstand me, I would love to see cryptocurrencies rally again right now, but this thing we are doing is not about today, it's not about double digit gains in a week. It's about taking back control, and having a system of true accountability.

Let's not forget the big picture…

@chbartist