My City September 2022

MYFINANCES

Why is everyone so concerned about INFLATION? U ntil the previous year, the concept of economic in ation was nothing more than a good story the older generation would hold over everyone else’s head. Back in the early ‘80s, it wasn’t in ation that made people very uncomfortable with managing their - nances, it was the Fed’s policies to combat in ation that forever changed an entire generation’s view of debt. ose people in America who held mortgages or loans during the early ‘80s are not nearly as comfortable with holding debt as most of the generations that have come after them. We cannot blame them for being so averse to holding loans unless completely necessary; mortgage rates topped out at 18.63% in October of 1981 but stayed at almost 10% through the end of 1989. To understand why controlling in ation is of utmost importance, we rst need to understand what it is. In economic terms, in ation is the rate of increase of prices for things we purchase over a given period of time.We can view this both positively and negatively. From a positive position, all things that we own – home, investments and cars – increase in value but at the same time, our ability to purchase things with each dollar decreases.Discussing the causes of in ation can become pretty complicated and over the past year, the subject has been debated quite a bit because it seems to be caused by a combination of factors.Most of the in ation issues seem to stem from COVID and the e ect it had on our economy.A period of increased costs for production due to supply chain issues and salary increases has made it much more expensive to make things post-covid vs pre-covid.We also saw a large increase in demand coming out of the pandemic, when people had additional sav ings and an increased appetite for spending due to lockdowns. In order to help put money into the economy to help businesses get through the COVID slowdown, we also saw a staggering increase in money supply in the form of multiple stimulus packages.No one truly knows which of BY JOEL LAGORE, CFP®, AIF®

these factors has had the most e ect on us reaching our current, almost 40-year high in ation numbers; but it is safe to say that in ation does not seem to not be going away as quickly as everyone hoped it would. So, how is in ation controlled and by whom? e way to reduce in a tion is by reducing the purchasing power of the people – this can be done by either the Federal Reserve or to a lesser extent, the U.S. government. Not to get too deep into the weeds, but the Fed can either raise or decrease rates to make borrowing more or less expensive, or they can increase monetary supply by buying or sellingTreasury bills. e U.S. government can also increase taxes, giving taxpayers less disposable income.Any type of bill that claims to help decrease in ation could potentially do the exact opposite by signi cantly increasing monetary supply again. Why is controlling in ation important? e U.S. is currently the world’s reserve currency, meaning that most countries do all of their trading with U.S. currency and most hold their cash in some type of U.S. currency or bond. If in ation were to spin out of control and our currency devalue vs the rest of the world, it could lead us down a path of no longer being the currency that the rest of the world wants to hold. So, as we head into mid-term election season and are inundated with nger-pointing on both sides of who did what and who caused what, let us remember that going forward, there is only so much that either political party can do to control something as signi cant as in ation. ® HTTPS://FRED.STLOUISFED.ORG/SERIES/MORTGAGE30US HTTPS://TRADINGECONOMICS.COM/UNITED-STATES/MONEY-SUPPLY-M0 HTTPS://WWW.INVESTOPEDIA.COM/ASK/ANSWERS/111314/WHAT-METHODS-CAN-GOVERNMENT-USE-CONTROL-INFLATION.ASP

Joel P. LaGore, Certified Financial Planner and partner with OLV Investment Group, focuses on money man agement. Joining the Downtown Flint revitalization effort, his office is located in The Durant at 607 E. Second Ave., Suite 100. Joel and his wife Sonya are raising two daugh ters in Flushing, where he enjoys philanthropic pursuits in

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his local community, in Flint at large and in Genesee County.

CFP Board owns the certi cation marks CFP®, CERTIFIED FINANCIAL PLANNER™, and CFP® in the U.S. e Accredited Investment Fiduciary (AIF®) Designation demonstrates the individual has met educational standards to carry out a duciary standard of care and acting in a client’s best interest. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a pro t or protect against loss in periods of declining values. Registered representatives o er securities through AE Financial Services, LLC (AEFS), member FINRA/SIPC. Investment advisory services o ered through OLV Investment Group, a Registered Investment Adviser. OLV Investment Group is independent of AEFS.

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