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You are here: Home / Podcast / 2: What Causes Inflation and Deflation?

2: What Causes Inflation and Deflation?

May 19, 2014 by David Stein · Updated October 28, 2020

Inflation is caused when there is too much money flowing through the economy relative to the amount of goods and services being produced, leading to a jump in prices.

 Large price sign with red letters and white arrows sitting on an old wagon in a field. The sign says "92.9." Photo by runrun
Photo by runrun

Inflation is similar to how athletes experience unpleasant side effects when they run faster than their aerobic capacity. When too much money chases capacity-constrained goods, services, and workers, it leads to a rise in overall prices.

Conversely, deflation, or an overall decline in prices, can occur when there is excess capacity in the economy.

Inflation is guaranteed to destroy wealth unless you protect against it. In this episode, you’ll learn:

  1. The three personal finance questions 70% of Americans, 69% of French and 96% of Russians couldn’t answer.
  2. How inflation is measured.
  3. What it’s like to live under hyperinflation.
  4. What causes inflation and deflation.
  5. How quality improvements impact inflation.
  6. How human emotions impact inflation and deflation.
  7. How deflation can lead to downward economic spirals.
  8. How central banks try to control inflation and deflation.
  9. How to protect your portfolio against inflation.
  10. What are the best asset types to protect against inflation.

Show Notes

Most People In The World Have No Idea How To Manage Their Money

The Economic Importance of Financial Literacy: Theory and Evidence

Want to become a better investor?

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Would you like to read more about inflation? Check out A Complete Guide to Understanding and Protecting Against Inflation.

Related Episodes

94: How Money Is Created and Destroyed

162: Is Inflation A Good Thing?

190: How To Keep Up With Inflation

272: Is Inflation Measured Wrong?

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Filed Under: Podcast Tagged With: deflation, inflation

J. David Stein
Darby Creek Advisors LLC
P.O. Box 68544 • Tucson, AZ • 85737

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