Inflation & Devaluation
Last updated
Last updated
Devaluation is also referred to as currency depreciation or currency debasement.
There are 195 recognised countries in the world according to the United Nations, each and everyone has experienced inflation and depreciation of their currency over the decades. The US Dollar for instance has lost over 90% of its value in the past 100 years. The Nigerian Naira was equivalent to $1 in 1985 ($1=N1 average range in 1985), it is now over N1000 to the $.
Your groceries are not becoming more expensive, your money is becoming less valuable.
You have personally experienced the price of groceries and household items being way higher than it was a few years ago that is inflation. In most developing nations, the value of their currencies is much less than it was a decade ago and it is never going back to those figures (that's devaluation).
From the Ghanaian Cedi to the Turkish Lira to Ethiopian Birr to Nigerian Naira, to the Egyptian Pound, we have seen currencies lose so much value against the US Dollar. As the US goes through inflation, currencies in developing countries also go through intense devaluation combined with inflation (double trouble)😭
The world trades with the US Dollar making it the global currency for commerce as well the savings account for countries, when the US Government increases their money supply (like stimulus package during Covid or bailouts of banks during financial crisis in 2008), this results in inflation all over the world and subsequent devaluation of most currencies. This leads to double jeopardy for those in developing and emerging nations (most of the world). Their citizens are getting poorer over time because the value of their earnings and savings is reducing based on economic forces that they have nothing to do with or can control.
Billions of people globally are losing their wages, savings, pensions, and experiencing destruction of their purchasing power. The stories of Lebanon, Argentina are becoming more relatable as many around the world experience the rapid depreciation of their purchasing power. In our lifetime it is projected we will experience atleast one economic crisis and since we have witnessed one within the last couple decades, we probably will witness another in our lifetime😭😭.
The average Nigerian millennial has seen the Naira lose 90% of its value in their lifetime. The endless devaluation of most currencies means folks are getting poorer over time while earning and saving in their local currencies. It is also lost on many that currency depreciation and inflation is devaluation of your labour, debasement of your hard work over the years. Think of it like same job, lesser pay, or paying more for the same medicine than from three years ago.
Inflation & devaluation directly impact your quality of life and the higher inflation/devaluation, the lower quality of living for you and your household. They are like the silent, invincible thieves.
While there are a few economic factors that cause inflation, the main driver is the excessive money printing of Governments combined with their high debt levels and budget deficits. There are other factors that contribute to shorter-term inflation like trade wars, conflict, climate change, supply chain disruption.
For centuries Gold has been used as a hedge against economic crisis, persistent inflation and currency debasement. This is why countries buy and store gold as part of their reserves alongside US Dollar.
El Salvador a country in Central America became the first sovereign nation to buy and hold Bitcoin as a treasury asset in September 2021. Donald Trump during his presidential campaign in July 2024, promised to make Bitcoin a reserve asset if elected. The US is currently the largest holder (as a country) of Bitcoin that it kept from seizures in the past. This indicates that while the world has mainly used gold as a hedge, bitcoin may emerge as an alternative reserve asset to protect against inflation and devaluation used by both countries and individuals.
