Inflation is caused by money supply exceeding actual demand, leading to rising prices and currency depreciation.
This not only affects the actual purchasing power of money but also increases the burden of living.
Why is inflation making a comeback?
- The continued escalation of global geopolitical conflicts is a major factor driving up prices. The ongoing tensions in the Middle East, with no sign of easing in the Russia-Ukraine conflict, directly impact global energy supply and price stability. By March 2025, the average international crude oil price had reached $92 per barrel, a 15% increase from the same period last year. Rising energy prices have a domino effect, driving up costs in various sectors, including food and transportation.
- Supply chain restructuring is also quietly exacerbating inflationary pressures. In the post-pandemic era, the global industrial chain is undergoing a process of de-risking and regionalization, and the frictional costs associated with this process will ultimately be passed on to end consumers. A McKinsey report released in February 2025 shows that the restructuring of global supply chains is leading to an average increase of 7.2% in corporate operating costs.
- The lagged effects of global loose monetary policy should also not be ignored. From 2020 to 2022, central banks around the world implemented ultra-loose monetary policies in response to the pandemic, flooding the world with liquidity. Although many central banks have begun tightening interest rates since 2023, the impact of excessive money supply continues to be felt. Data shows that the M2 money supply in major economies worldwide remains approximately 30% higher than before the pandemic.
Investment Strategies to Combat Inflation
How can we protect our wealth in an inflationary environment?
With inflationary pressures plaguing the globe, how can we choose assets to preserve and increase value? The consumer sector is often a focus during inflationary periods, as rising prices drive up demand and prices for related goods. Recently, the market for household condiments has seen a wave of price increases.
The key to protecting wealth in an inflationary environment is choosing the right investment direction.
Precious metals such as gold and silver, as traditional investment products, will continue to increase in value as excessive money supply continues. Real estate is also an investment area worth considering. However, real estate investment requires careful risk management to ensure sound investment decisions. Purchasing value-preserving assets is crucial during inflationary periods. In fact, many assets are appreciated faster than the rate of inflation. Therefore, converting cash into suitable assets can preserve and increase its value. Real estate is one important tool for mitigating inflation.
Furthermore, investment and financial management can also mitigate inflation. However, the criterion for judging a good investment isn't simply to pursue high returns, but rather to outperform inflation. Investors should set reasonable profit expectations and avoid the pursuit of overnight wealth. Professionals may choose to invest in securities, bonds, or foreign currencies. However, these financial investments require in-depth expertise and are often difficult for ordinary people to master. Conversion of cash into real estate, such as real estate, is a more reliable option for the average person. In the long run, real estate not only preserves value and protects against inflation, but also offers higher returns.
Summary
Inflation is never a simple economic phenomenon; it's a protracted battle that affects everyone's financial security. Faced with the potential for accelerating inflationary pressures, ordinary people need to build a multi-layered defense system. This system should include rational asset allocation, professional skills development, optimized consumption structure, and investment in health and education. Data shows that households that systematically manage inflation experience a decline in actual purchasing power that is two to three times less than those that passively accept inflation. In today's world of rising global economic uncertainty, protecting your wallet requires not only financial knowledge but also a continuous learning attitude and a rational and calm mindset. Inflation is a silent war on wealth, but with adequate preparation, we can minimize losses and even find opportunities for wealth appreciation amidst this changing landscape. After all, crises and opportunities often coexist. Those who can navigate inflationary environments steadily are also able to seize new development opportunities amidst changing economic cycles.