It has just been announced that inflation has risen by 0.7% – and what that means is that the cost of buying standard things like food, clothes and petrol is 0.7% higher than it was a year ago. Although this is higher than the month before it is still very low and means that if you spent £100 last year then you will have to spend an additional 70p to get the same stuff this year.
In the grand scheme of things this isn’t too bad but where it does affect us is in the future value of our money (MMT Principle 4) because the future value of our money is only greater than today IF we can get a return on our money that is higher than the rate of inflation. So if inflation is 0.7% we need to get a return of at least 0.8% on our money for it to be worth more in the future than it is today.
That’s a difficult task today as standard deposit savings rates are less than the 0.7%, and often nearer to 0.2%. This means we have to start exploring investments where we can normally get a much higher return that 0.7% and this is vital otherwise we are always losing ground and becoming poorer day by day.