Börsenlexikon: Inflation

In an inflation or demonetization, in contrast to a deflation, the money supply grows more strongly than the supply of goods and services. As a result, more and more money has to be paid for at least most goods and services. Inflation in the narrower sense is when the money supply increases very rapidly and the currency loses value faster and faster. In times of high inflation, it can make sense to buy real assets such as precious metals, shares or real estate. As money depreciates, it becomes worth less and less, whereas the value of tangible assets increases.

Applying the classical definition of the term "inflation" as rising money and credit volumes, the past years have been characterized worldwide by high government-imposed inflation, i.e. strong money and credit volume growth. Unlike the inflationary 1970s, however, this inflation did not lead to significantly rising prices in the officially calculated baskets of goods. That is why modern politicians and their Keynesian economists could constantly rant about low inflation rates, even though the expansion of money and credit far outpaced economic growth.