High inflation surprises analysts and central bankers in the Czech Republic, Europe and the USA. At the same time, central banks have long aimed to keep some inflation rates, for example in the case of the Czech National Bank (CNB) it is two percent.
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Central bankers believe that a certain – relatively low – rate of inflation is beneficial for the economy. However, this is at odds with how consumers perceive it. They are watching what inflation is doing with their savings, from which they are increasingly cutting.
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At a time when consumers feel that inflation is spiraling out of control, they can, paradoxically, start behaving in a way that feeds the rise in prices even more. As Brian Wallheimer v Chicago Booth Review, this disproportion was seen at a time when the US was reporting 5% inflation.
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“Consumers, who are actually the drivers of inflation, seemed unaffected by the news, because they were obviously already working with the knowledge that prices were rising fast and rising further,” he wrote.
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“Homeowners have embarked on renovations, aware of the historically high prices of wood. People who cook at home felt the impact on food prices. Buyers of new and used cars watched the increase in prices due to the lack of chips, “he added.
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How to defend yourself?
But what should consumers do if they want to defend themselves against inflation, instead of feeding it even more by their behavior? According to Natland Group economist Petr Bartona, we are living right now in a time that offers many opportunities.
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“The economy is going through great changes now. Large investments are needed for all of them, and there is not a single reason why ordinary savers should not be able to contribute to these investments and thus to the return on these changes, even if they feel that they do not understand the investment, “he remarked to Novinek.
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“Today, investing can be indirectly involved, for example through various investment funds that understand investments but do not have the capital. People have free money, but they do not have an overview of where the projects are. It is thus possible for both parties to come together and be mutually useful, “he added.
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According to Barton, people secured against inflation through investments in the past, they just didn’t know about it. “They saved the money in a savings account and they didn’t have to worry more. The free capital was then used by the financial institution, which had a better use for the money. The income on the savings account was earned only because the bank invested the money. Today, when a bank doesn’t give people anything on a savings account, there is nothing easier than doing the same thing as before, just through a specialist, “said the economist.
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Don’t jump to the first offer
But the economist also urges caution. “Money in the bank is insured, not so much in investment funds. At least not from the state. But you can insure yourself by not jumping on the first high-yield offer. Rather than promising about the future, today the saver should look to the past, especially the reputation of such a fund, “he stressed.
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It is necessary to monitor how long the fund has been operating, who has managed it and what it has already achieved. “And then what he invests in. Does he have his investments under managerial control so that he can solve any problems in it? Or will the only solution for such a fund be to withdraw from the investment, thus only confirming a certain level of loss? ”
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“It’s not nearly as difficult as actually investing directly and then constantly monitoring how the investment is developing. And the world of simple returns will not return in the foreseeable future, while inflation is here now and will eat all those who do not secure themselves against it with any income, “Bartoň concluded.
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