There are those (such as consumer associations) who value thousands of euros for the average family, and there are those (such as producers’ associations) who “quit” for only five hundred euros. Raising one’s head to the current level of an “inflation monster” would definitely hurt everyone. For the average citizen who has to deal with insane prices. But also for companies, especially in a situation like the one we’re seeing where price increases are mainly due to energy and raw materials. Thus, even ordinary innovators – such as some traders who quickly adjust price lists – need not rejoice this time. Not much to beat: Accelerating inflation at its current rate (Istat +7.9% in July) is not good for anyone. The danger is that everything stops and the economic system enters a recession.
Protected Category: Retired
Draghi’s government has implemented a series of rules to help the most difficult families, starting with discounts on bills, which do not completely eliminate the effects of the higher cost of living. Retirees will be the most protected and those who receive the automatic cost of living adjustment mechanism this year. However, there is a double-edged mechanism: you start the year by following the ascension; One hundred percent refund is only for pensioners who receive monthly benefits of up to 4 times social benefits (about 2,000 euros), for others, partial recovery will be based on certain segments (pensioners who receive between 4 and 5 times social benefits will increase 90% for inflation , and retirees who receive more than 5 times social benefits will be 75% more than inflation).
Those most at risk of doing the most harm are employees, who at a fixed and always the same salary have to do balance exercises to maintain the same standard of living. Those who have little savings, can be paid by withdrawing their “treasure”. For others, there isn’t much that can be done: in the long run, high prices will cost something. Refund with contract extension? In general, it is always partial and arrives in any case with a delay of at least four years. Better not to believe too much. Traders were once said to have earned it because on the price tag, increases were always higher than inflation. But in reality, this is not the case at current levels: too high a price adjustment has the effect of discouraging purchases and losing customers. Indeed, in recent months, many large-scale distribution chains prefer to transfer only part of the price increase to prices, thereby reducing their profits.
Producers are the first to suffer, especially when high inflation depends, as now, on energy and raw materials. Rising production costs cause production costs to increase, but in general the increase cannot be automatically and instantly transferred to the price list. Initially, therefore, the effect of inflation will be felt on profits.
To combat the monster of inflation, the most effective weapon is in the hands of the central bank: increasing the cost of money, so that the system spends more wisely. An increase in interest rates is clearly a loss for those who have borrowed money at a variable rate: companies for their investments, and citizens for the purchase of goods or real estate. It also hurts the Treasury, which has to pay higher interest rates on its government bonds.
Inflation is not always bad. quite the opposite. For the construction and development of the economic system, an inflation rate of about 2% is required. Being below this level means systems will be disrupted, factories cut production because there is little demand for their products, and business will be disrupted. Inflation at very low levels, with prices either fixed or even falling, turns out to be beneficial to household balances, and is actually a symptom of the difficulty of the economic system moving backwards. In fact, falling prices leads to a vicious cycle that is dangerous for the economic system: many companies cannot stay in the market and close; Thus jobs are lost, family incomes fall and consumption is reduced; In order to be able to sell the surviving companies lowering their prices further, they are forced to cut costs (including labor costs) and the cycle continues, as the country gets poorer. On the other hand, when the economy is booming, people shop, businesses hire, and young people find jobs.
Source : hardwoodparoxysm.com