This year, inflation rates have been on the rise all over the planet. For a bit of telling numbers, the current inflation rate in Germany is 7.5%, in the U.S. it’s 8.5%, and in India 6.5% – all abnormally high numbers whose consequences can’t be ignored.

Inflation is traditionally seen as having a negative overall effect on individuals’ financial situation. However, some winners who stand to actually profit from it do exist. In this article, we’ll take a look at who those lucky groups of people are.

Inflation 101

Before we proceed, let’s quickly explain just what inflation is. Namely, as a government prints additional fiat currency (e.g. Indian rupee, U.S. dollar, or euro), the value of that currency drops. In turn, this causes the prices of products, goods, and services to increase. This is precisely what high economic inflation is.

Generally speaking, both very high and very low inflation levels aren’t beneficial for a country’s economy. And while the majority of citizens worldwide wish for the current rates to drop, some are in a better position than others.

Winners in a time of inflation

Debtors

Individuals, businesses, and even governments with substantial debts will find the current economic circumstances to be beneficial, when it comes to repaying these debts.

For individual borrowers who have incurred their debt before rising inflation rates, the reason is simple: the debt remains the same, while a fiat currency is now worth less. In other words, they will have to return the same amount of money, but the actual value of that transaction will be less costly. The same goes for business owners who are in debt, only with the added bonus of being able to increase the prices of their goods and services.

When it comes to governments, however, the situation is slightly more complicated.

Namely, whenever the inflation rates are higher than the bond yields percentage of government debt bonds, the actual value of these bonds will also drop. In turn, the governmental debt shrinks, along with the value of bonds.

Crypto miners

One of the essential ways in which cryptocurrency, such as Bitcoin, differs from fiat currency is that national governments have no control over its volume. In theory, this makes it perfect for protecting people’s wallets when the value of fiat currency is dropping. Unfortunately, in practice, the value of crypto is rather volatile, i.e. it is prone to frequent price fluctuations.

Enter stablecoins. This is the type of cryptocurrency that is designed to be backed by a fiat currency, usually the U.S. dollar. Effectively, 1 stablecoin will always be worth 1 dollar.

It may seem counterintuitive to use stablecoins as a hedge against inflation, as the value of the U.S. dollar is shrinking. However, crypto miners are earning a significantly more sizable passive income when compared to holding fiat currency in a bank. Needless to say, this is highly beneficial in a time of high inflation.

We suggest using the Cardano cryptocurrency platform and its Djed stablecoin, and if you’re a beginner, it’s most convenient to do this with a mobile app. In fact, there’s never been a better time for mining Cardano with Android device.

Owners of physical assets

Unlike money, whose value drops in times of high inflation, the value of physical assets is not affected. For example, if you’re a landowner, you’ll be glad to hear that value of the land you own will not change due to the rising inflation.

Owners of such assets can thus benefit from the rising inflation by selling at an unchanged actual price, which is adjusted for the inflation rates.

Moreover, gold or silver is often used as a hedge against inflation, as its value obviously cannot be diluted by printing more of it, unlike fiat currency.

Of course, the price of gold and other physical objects is subject to change, regardless of the inflation rates. Still, holding some gold is a lucrative way to stay protected and benefit during inflationary periods.

References:

https://tradingeconomics.com/country-list/inflation-rate

https://www.benzinga.com/money/how-to-beat-inflation-with-stablecoins

https://www.investopedia.com/ask/answers/111414/does-inflation-favor-lenders-or-borrowers.asp

https://www.cnbc.com/2022/06/15/jim-cramer-why-gold-is-a-winner-in-times-of-inflation.html