Inflation and Interest Rate Dance on The Economy

Actually this is about the two factor affecting financial landscape, interest rates and inflation, I know they are two different thing but the two greatly make an Impact in our financial growth and investments. I don't know if we ever experienced a world where there is inflation and at the same time high interest rate, i think that is exactly what we are experiencing right now in the world.

create on adobe

The two forces dancing and making significant in the economy, our financial life and causing reduction to purchasing power and economy meltdown. I remember some month back when bank in America are failing, most people think all of that are from the exposure to crypto projects but that is not truth. The banks were affected by inflation and interest rate which resulted in most of their failures.

Normally banks generate revenue through the borrowing of loan, but when the government come up with rate hiking it made many institution to go away from high bank interest and that really affect banks operation and some other things. What I'm trying to figure out here is that when inflation dance with interest rate it affect lot of things like decreasing purchasing power of a currency and can easily have a significant impact on individual and businesses.

Obviously when the prices is low and interest rate are low, borrowing of money will becomes affordable for everyone which I think it going to help in stimulate the economic growth and increase in individual investment. People will have investment in an environment that will encourage them with great potential to generate good returns, and also borrow money at lower rates for their business growth. But when? When are we going to enjoy low interest and experience deflation.

I always imagine how come this world becomes expensive for individuals to live, people are lamenting, there is no circulation in currency and when things like this are happening it dampen the economic growth, because those that supposed to create opportunity for people with their investment are also affected.

Let us think of it together when central banks saying they set interest rates to manage inflation, does that sound good, honestly I keep laughing whenever that rings in my brain, oh is that to manage inflation or keep people struggle. There is no how interest rates will help in stimulate economic growth or dance to the call of high inflation if they don't actually bring down commodities like gas, oil and other things that help sustain the economic. If the two are still dancing in our economic honestly, I don't see opportunities coming for growth and profit in our investment. For instance you can not expect a sectors to borrowed in high rate cost and ask such sector to support assets prices, that will be capital No! The sectors will be after how to increase it operation to get high profit and in the course of doing that it will be causing damages to the economic growth and individual lifestyle.

Obviously, government give us interest rates and cause inflation to dance on individual investment, and for anyone that doesn't careful observe it and understand how to thrive in such bad economic they will left behind, there business will also suffer. Is better to understand how to diversify in this kind of period as an investor, diversifying can only be the way to help Incase one investment affected by the economic, sure the other will stay afloat.