“At age 10 in 1980s Brazil, my job was to run around the aisles of the supermarket trying to beat adults, who walked around raising prices throughout the day with comically large label guns. Since I was good at math, my mother would hand me our monthly grocery budget, and I would run through the supermarket filling our shopping cart — not having to stop to input values on a calculator saved us precious time against the labelers.” Those are the recollections of Brazilian economist Rodrigo Zeidan in a recent edition of the New York Times.
Zeidan was describing what life was like in the hyperinflationary Brazil of the late 20th century. With the value of the country's currency in rapid decline, the ability to quickly exchange what was losing value for goods that were real and edible was essential to the wellbeing of his often lower-middle class family. Such is life when there's inflation. Inflation doesn't cause prices to rise as much as inflation is a direct effect of a currency losing value such that the prices of most goods and services persistently rise. When there's inflation, saving logically declines simply because any returns on investment will come back in “money” that is exchangeable for quite a bit less than it commanded at the time that the investment was made. Think about the latter for a moment. It's an important input to this discussion.
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