💎 "We are in a debt trap"


In this week’s edition of Three Point Five, the focus is on inflation.

Inflation is one of the most critical factors in understanding the current state of the economy and its future direction. The government and the RBI have their strategy for targeting and taming inflation.

Businesses and markets tend to factor in and react to it. Whilst the common man is mainly concerned about increasing prices.

Over the last few quarters, inflation has been the critical challenge driving policy decisions, businesses, markets, and investment decisions.

Over the last few weeks, I came across different perspectives and opinions on inflation and its impact on our lives that I’m sharing with you.

1. How will inflation affect the economy in 2023?

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Have you ever thought about past economic crises and wondered about the scale of events that will unfold in the future? Having dealt with the pressures of inflation in 2022, governments, businesses and individuals are bracing for 2023. This podcast gives a perspective on how inflation will impact us in 2023.

This podcast will take you through —

Why inflation is essential to understand when considering where we might be headed The factors that have pushed prices over time and resulted in inflation The impact of inflation in 2022 and what to out for in 2023

Listen to the podcast episode here — https://www.bu.edu/articles/2022/how-will-inflation-affect-the-economy-in-2023/

Key Takeaways :

  1. Inflation is a concern for the domestic economy in 2023, as high costs, slow hiring, and stagnant salaries continue to affect industries in the US and abroad

  2. Supply chain issues and other factors have contributed to some of the highest inflation in recent memory

  3. The inflation rate will decrease in 2023, settling at around 3%

  4. This podcast suggests that the disconnect between inflation concerns and spending habits may be due to some individuals benefiting from inflation while others are hurt by it

2. Inflation is taking hold worldwide. Where is it hitting the hardest?

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Inflation is one of the most critical factors impacting businesses and markets today. In the past few months, inflation has reared its ugly head across the globe. Thus, it becomes essential to understand its implications. I found this article interesting because it gives deep insights into the impact of inflation on different countries and analyzes how and why various countries were impacted so hard.

Through this article, you can get an understanding of —

What led to high inflation across the world How various countries are impacted by inflation How higher interest rates are slowing inflation and How countries are addressing inflation

Read the whole article here — https://www.forbes.com/sites/qai/2022/09/28/inflation-is-taking-hold-worldwide-where-is-it-hitting-the-hardest/?sh=2c86ec73275c

Key Takeaways :

  1. Inflation is a global issue exacerbated by several factors, such as government spending, the COVID-19 pandemic, supply chain issues, higher wages and strong consumer demand

  2. Central banks are fighting inflation by raising interest rates, but other measures, such as energy price caps, can also combat the issue

  3. Most countries are experiencing high inflation. It is worse in countries like Turkey and Argentina due to political and currency issues

  4. Countries must walk a fine line between being too aggressive and expediting recessionary conditions and not doing enough to control inflation sufficiently

3. Why do salary increases not keep pace with inflation?

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Have you ever wondered if your salary increment accounts for inflation? Whether you are an employer or employee, inflation plays an essential role in evaluating compensation. It is important to understand how inflation and salary increments are connected. Inflation is affected by the cost of goods, while wages are determined by labour supply and demand. This can leave both employers and employees in a precarious situation.

This article will help you understand —

Why Inflation and salary increases are not the same Factors that contribute to this mismatch and What are companies doing to solve this problem

Read the whole article here — https://www.forbes.com/sites/johnbremen/2022/04/07/why-salary-increases-do-not-keep-pace-with-inflation/?sh=43f2ea037533

Key Takeaways :

  1. Different factors drive inflation and salary increases. Inflation represents changes in the cost of a market basket of goods, while wages are driven by changes in supply/demand for labour

  2. While inflation is increasing, companies are slow to raise wages

  3. Companies are investing in flexible bonuses, stock and employee benefit plans to compensate for the lack of salary increases

  4. The rise in individual pay levels has been due to increased starting salaries, salary increases for those who changed jobs, and increased benefits

4. “We are in a debt trap” - Nouriel Roubini on 10 ‘mega threats’ to our world and how to stop them

In this revelatory video, Nouriel Roubini, a world-renowned economist, discusses 10 mega threats the world faces and offers insights on how to mitigate these threats. This video explores the significant threats such as climate change, inequality, and debt.

I think it is crucial to understand Nouriel’s take on how these threats make it more likely for us to head for a global economic crash of stagnant growth, debt crises and high inflation.

In this video, Nouriel Roubini talks about —

The mega threats humans fac How will these threats impact our present and future and How the debt trap has serious repercussions and the importance of being prudent with money

Watch the video here — https://www.youtube.com/watch?v=ADh6QTp8798

Key Takeaways :

  1. The global economy is facing a debt trap due to the growing levels of inequality, excessive debt, and financial instability

  2. Global cooperation is needed to address the ‘mega threats’ facing the world, such as climate change, inequality and pandemics

  3. Governments must use fiscal and monetary policies to support economic activity. Extended periods of deflationary debt leveraging must be avoided