Economic Squeeze on Capital

The negative effects of inflation and debt on buying power

There are two significant sources of pressure that impact buying power. The first is the external pressure of inflation. Inflation erods buying power by increasing the price of goods and services. For example, an item that costs $1 in 1980 would cost $2.65 in 2010. The second pressure is the internal pressure of consumer debt. Consumer debt consumes buying power when financing costs are allowed to compound. Left unpaid, financing costs can quickly snowball out of control. In addition, debt becomes the only purchasing option for large or unexpected expenditures when one has no available capital.

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