Why is inflation so significant?

The real problem with inflation is that it can be self-sustaining. If prices start to rise quickly, it can lead to a vicious cycle where workers demand higher wages, which push prices higher still, and so on.

The most common measure of inflation is the Consumer Price Index or CPI. This figure tells us that the annual rate of inflation is at the price of all things, such as food, clothing and gasoline.

The last time the United States had a major inflation problem was in the 1970s. At that time the price of oil rose sharply, and the PIU exceeded 10%. It may seem like a lot, but if inflation stays at 10% a year, in just seven years, prices will double. The Federal Reserve had to raise rates too high to finally eliminate the spiral of inflation. they were briefly over 20%, which led to a long, deep decline in 1981 and 1982.

If it is not allowed for a long time, inflation can sometimes be completely out of control. This is called "hyperinflation", with prices rising every day or even every hour and can completely destroy not only the economy but also society as a whole. Hyperinflation has crippled the Weimar-era government, and has recently led to extreme poverty in Zimbabwe.

The main lesson of the story is that the price of keeping a bottle of gin is much lower than the price of leaving it.