Can inflation lead to depression?

Well, the answer to this question depends on the type of person being affected and the answer is also yes and no. first of all, let's discuss what’s inflation for a memory refresh. Inflation in a general sense is the sudden increase in the price of goods, services and commodities and this is due to the reduction of the money supply in an economy. In some cases, some people believe inflation is necessary once in a while in the economy to help push the economic growth while some believe it’s harmful to the economy.

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Does it lead to depression?

For an average man, when inflation hits, the value of their salary and pension becomes more or less nothing compared to the increase of goods in the economy because when inflation comes, that is, increase of goods and services, salaries are not being increased too so they will have no option than to tighten up their budget limiting themselves to so many things just to meet up with the high cost of living.

If one tends to even earn little compared to the average man they won’t be able to even meet up with the price of goods with their little change hence they start worrying thinking of what to do to meet up with the high cost of living and if they can’t then they can fall into depression from worrying and struggling.

Who benefits from Inflation?

Despite inflation being bad and affecting the people in the economy making them work more to earn more to meet up with the high cost of living, there are people who actually benefit from inflation.

Borrowers: when borrowers collect money from lenders before inflation hits, it favours them more when they will be paying back because then it will have less value than when they originally collected the money and lenders won't dare ad interest because of an agreement has been made on the initial money collected.

Lenders: when inflation hits and people can’t meet up with the high cost of living, the next possible option is to borrow money hence giving the lenders the opportunity to increase their interest rate on the money to be distributed out.

Then lastly the wealthy or politicians: These set of people more or less do not care about the high-cost living because they have enough money to meet up with the inflation and they can also increase the cost of their services or goods to benefit themselves or earn them more depending on their line of work.

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