The Impact Of Inflation

Workers with salaries remain very disadvantaged by the existence of inflation.

Inflation has had a positive impact and negative effects depends or whether severe inflation. When inflation was mild, thus having a positive effect in the sense that it can push the economy better, i.e. increase national income and make people passionate for work, saving and investment. Conversely, in times of severe inflation, i.e. in the event of uncontrollable inflation (hyperinflation), the State of the economy become garbled and the economy felt lethargic. People aren't eager to work, saving, investment and production or hold as prices rise quickly. The fixed-income recipients such as civil servants or private employees and laborers would also be overwhelmed bearand offset the price so that their lives become increasingly degenerated and collapsed from time to time.

For the people that have a fixed income, inflation is extremely harmful. We take the example of a retired civil servant in 1990. In 1990, his retirement money are enough to meet the needs of her life, however in 2003-or thirteen years later, the buying power of their money might just stay a half. That is, his retirement money was no longer enough to meet the needs of his life. In contrast, people who rely on income based benefit, such as employers, are not harmed by inflation. So is the case with employees who work in a company with a salary following the inflation rate.

Inflation also caused people reluctant to save because of the declining value of the currency. Indeed, generate interest savings, but if the rate of inflation above the flowers, the value of money declines nonetheless. When people are reluctant to saving, investment and the business world will be difficult to develop. Because, to develop the business world require funds from bank savings obtained from the community.

For people who are borrowing money from the bank (debtor), inflation is favorable, because at the time of payment of the debt to the lender, the value of money is lower than at the time of borrowing. Instead, creditors or those who lend money will suffer losses due to lower returns on value for money in comparison at the time of borrowing.

For producers, inflation can be profitable if earned income is higher than the rise inproduction costs. When this happens, the manufacturer will cause a rise in the cost of production through to the end, then the manufacturer harming producers reluctant to continue production. Manufacturers to stop production for a while. In fact, when it is not able to follow the rate of inflation, the manufacturer may attempt will go bankrupt (usually occurs at small entrepreneurs).

In General, inflation can result in reduced investment in the country, prompting a rise in interest rates, encourage capital investment that is speculative, the failure of the implementation of development, economic instability, the deficit of the balance of payments, and a drop in the level of life and the welfare of society.