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Issue15
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Issue15

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Published in: Business, Economy & Finance
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  • 1. Ross Naylor +48 (22) 389 65 70 (w) +48 512 275 706 (m) ul. Królewska 27 lok 411 Warszawa 00-060 Poland Up, Up and Away Inflation is probably the most significant financial factor that is going to affect us all in the not so distant future.On paper, it may not necessarily be the most exciting Words from the wisetopic. However, from an investment, retirement or capitalprotection perspective, it is one of the most important "In theory, there is no difference between theoryconsiderations to take into account when planning for and practice. In practice,your future. there is."A Definition of Inflation - Yogi BerraInflation is the rise in the cost of living or an increase inthe money supply in an economy. An easy way to thinkabout this is the rise in the cost of food in your basket orpetrol in your tank.2010, the Facts!Wheat +47%, Corn +14%, Brent Crude Oil +26%, Pork Tick! Tock!Bellies +19%, Coffee +62%, Cotton +96%, Copper+30%. According to the United Nations
  • 2. Population Division, the medianHowever, the official reported year on year inflation rate age of people in Western Europein the Eurozone at the end of December 2010 was only will increase over 50 years from 34 in 1980 to 47 in 2030 (Japan2.2%! Hmm, something doesn t add up. will go from 33 to 52 in the same time).So, Why is Inflation So Important Right Now? Think about the pressure thatThe policies that governments around the world are this increase is going to put onfollowing right now, i.e. printing lots of money, are in the state pensions systems.medium to long term highly likely to cause inflation andthus erode our standards of living. Think about it even more so if you expect to retire in more than 20 years time and are countingHowever, governments have an incentive to distort real on the state to support you.inflation rates, as shown above. This is because it allowsthem to keep their inflation-linked benefit and pensionpayments low. DisclaimerAt 5% inflation, the purchasing power of your money is The views expressed here arecut in half in less than 15 years - and cut in half again in my own. They are not necessarily shared by AESthe next 15 years. At 7%, your purchasing power drops International. They are subject toto 25% of its present level in just 21 years. change at any time based on market and other conditions.Inflating a Balloon This is not an offer or solicitation for the purchase or sale of anyLets use an example. Imagine a person inflating a security and should not beballoon. Lets imagine that the person looks a bit like construed as such. Referencesthis. The air will be the money and the balloon will be to specific securities are foreveryday prices. When the Central bank begins to use its illustrative or informationalprinting press to pump money into the economy, they purposes only and are not intended to be, and should notinitiate the inflation of our prices. be interpreted as, recommendations to purchase or[To read the conclusion the this article, please click sell such securities.here] Call me: +48 (22) 389 65 70 (w) +48 512 275 706 (m)

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