In the US, inflation just hit its highest rate since 1982.
"So what, man? It's just a natural phenomenon. And there's nothing we can do about it."
Wrong and wrong.
Here are three things you absolutely must know about inflation.
(I'll give you a personal action plan at the end. But do read this first. It's essential.)
1. Inflation is Not a "Natural" Phenomenon
Even allegedly reliable resources like Investopedia are rampantly spreading misinformation about this ...
"Basically, inflation is caused by a rise in the price of goods or services."
Yikes. No. They have it precisely backwards. (More about that in a moment.)
They further (incorrectly) state inflation is primarily a function of supply and demand for goods and services.
Let's dig in ...
Yes, supply and demand for goods and services does cause fluctuations in price. Of course. But that's usually only a temporary and local phenomenon. "Temporary" in that it changes as supply and demand fluctuate - and "local" to specific goods and services.
It does not account for the much larger phenomenon: the general economy-wide steady increase in prices over time. That comes from the "inflation" of the supply of money. Not of individual goods and services.
Think of it like this ... monetary value is more a function of scarcity than of intrinsic value.
Oxygen has vital intrinsic value. But because it's everywhere, we can take it for granted.
Gold, on the other hand, has relatively low intrinsic value, but high scarcity (and portability). That's why it's been the standard unit of currency throughout history. (Until very recently. Hold that thought.)
If we were to flood the market with massive volumes of gold, the value of gold would radically drop.
"I will give you 5 gold coins for that cow."
"Dude, I have a literal metric ton of gold in my backyard. No way."
So ... how then, does the supply of money go up? If it's not a "natural" phenomenon, what is it?
Well, before I answer that, let me give you a little puzzle to solve.
Puzzle #1: why has the price of gold (in US dollars per ounce) changed thusly? (see chart - type your answer in the comments)