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I. Read and translate the text. Write down your translation of the second paragraph. Historical Examples of Inflation and Hyperinflati
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I. Read and translate the text. Write down your translation of the second paragraph.
Historical Examples of Inflation and Hyperinflation
1. Today, few currencies are fully backed by gold or silver. Since most world currencies are fiat money, the money supply could increase rapidly for political reasons, resulting in inflation.
2. The most famous example is the hyperinflation that struck the German Weimar Republic in the early 1920s. The nations that had been victorious in World War I demanded reparations from Germany, which could not be paid in German paper currency, as this was of suspect value due to government borrowing. Germany attempted to print paper notes, buy foreign currency with them, and use that to pay their debts. This policy led to the rapid devaluation of the German mark, and with it, hyperinflation. German consumers exacerbated the cycle by trying to spend their money as fast as possible, expecting that it would be worth less and less the longer they waited. More and more money flooded the economy, and its value plummeted to the point where people would paper their walls with the practically worthless bills. Similar situations have occurred in Peru in 1990 and Zimbabwe in 2007-2008.
2. Наиболее известным примером является гиперинфляция, которая произошла в Немецкой Веймарской республике в начале 1920-х годов. Страны, победившие в Первой мировой войне, потребовали репарации от Германии, которые не могли быть оплачены в немецкой бумажной валюте, поскольку это имело подозрительную ценность из-за долгов правительства. Германия пыталась напечатать бумажные купюры, покупать за них валюту и использовать их для погашения своих долгов. Эта политика привела к быстрой девальвации немецкой марки, а вместе с ней и к гиперинфляции. Немецкие потребители усугубили этот процесс, пытаясь потратить свои деньги как можно быстрее, ожидая, что это будет стоить все меньше и меньше, чем дольше они ждут. Все больше и больше денег поступало в экономику, и их ценность резко упала до такой степени, что люди могли оклеить свои стены практически бесполезными банкнотами. Аналогичные ситуации произошли в Перу в 1990 году и Зимбабве в 2007-2008 годах.
3. Central banks have tried to learn from such episodes, using monetary policy tools to keep inflation in check. Since the 2008 financial crisis, the U.S. Federal Reserve has kept interest rates near zero and pursued a bond-buying program – now discontinued – known as quantitative easing. Some critics of the program alleged it would cause a spike in inflation in the U.S. dollar, but inflation peaked in 2007 and declined steadily over the next eight years.
4. While excessive inflation and hyperinflation have negative economic consequences, deflation's negative consequences for the economy can be just as bad or worse. Consequently, policy makers since the end of the 20th century have attempted to keep inflation steady at 2% per year. The European Central Bank has also pursued aggressive quantitative easing to counter deflation in the Eurozone, and some places have experienced negative interest rates, due to fears that deflation could take hold in the eurozone and lead to economic stagnation. Moreover, countries that are experiencing higher rates of growth can absorb higher rates of inflation. India's target is around 4%, Brazil's 4.5%.
5. Inflation is generally measured in terms of a consumer price index (CPI), which tracks the prices of a basket of core goods and services over time. Viewed another way, this tool measures the "real"—that is, adjusted for inflation—value of earnings over time. It is important to note that the components of the CPI do not change in price at the same rates or even necessarily move the same direction. For example, the prices of secondary education and housing have been increasing much more rapidly than the prices of other goods and services; meanwhile fuel prices have risen, fallen, risen again and fallen again—each time very sharply—in the past ten years.
6. Inflation is one of the primary reasons that people invest in the first place. Just as the pack of gum that costs a dollar will cost $1.02 in a year, assuming 2% inflation, a savings account that was worth $1,000 would be worth $903.92 after 5 years, and $817.07 after 10 years, assuming that you earn no interest on the deposit. Stuffing cash into a mattress, or buying a tangible asset like gold, may make sense to people who live in unstable economies or who lack legal recourse. However, for those who can trust that their money will be reasonably safe if they make prudent equity or bond investments, this is arguably the way to go.
7. There is still risk, of course: bond issuers can default, and companies that issue stock can go under. For this reason it's important to do solid research and create a diverse portfolio. But in order to keep inflation from steadily gnawing away at your money, it's important to invest it in assets that can be reasonably be expected to yield at a greater rate than inflation.
II. Read the text and match these statements (1-10) T (true) or F (false) according to the information in the text.
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