What does an x% inflation rate actually mean?
"Let's say there's a product worth $10 in July and the inflation rate in August is 10%. Will it then cost $11 in August? Yes.  That's basically what inflation means. However.  The ""monthly"" inflation numbers you typically see are generally a year over year inflation rate on that month.  Meaning August 2017 inflation is 10% that means inflation was 10% since last July 2016, not since July 2017. At the micro consumer level, inflation is very very very vague.  Some sectors of the economy will inflate faster than the general inflation rate, others will be slower or even deflate.  Sometimes a price increase comes with a value increase so it's not really inflation.  And lastly, month over month inflation isn't something you will feel.  Inflation is measured on the whole economy, but actual prices move in steps.  A pear today might cost $1, and a pear in five years might cost $1.10.  That's 10% over 5 years or about 2% per year but the actual price change might have been as abrupt as yesterday a pear was $1 and now it's $1.10.  All of the prices of pears over all of the country won't be the same.   Inflation is a measure of everything in the economy roughly blended together to come up with a general value for the loss in purchasing power of a currency and is applicable over long periods.  A USD inflation rate of 3% does not mean the pear you spent $1 on today will necessarily cost $1.03 next year." As pointe out by @quid, inflation figures are almost always quoted as a comparison of prices last month, and prices a year ago last month.  So 10% inflation in August means that things cost 10% more than they did in August a year ago.  This can lead to some perverse conclusions. Consider an imaginary economy where prices stay constant over years.  Annualized inflation is zero. Then something happens on January 2nd, 2018.  Some crop fails, a foreign cheap source of something becomes unavailable, whatever.  Prices rise, permanently, as more expensive sources are used. This is the only disruption to prices. Nothing else goes wrong. So, in February, 2018, the authorities find that prices in January, 2018 rose by 1% over January 2017. Inflation! Politicians pontificate, economists wring their hands, etc. In March, again, prices for February, 2018 are found to be 1% higher than for February, 2017.  More wailing... This goes on for months.  Every month, inflation (year over year) is unchanged at 1%.  Everyone has a theory as to how to stop it... Finally, in February, 2019, there's a change!  Prices in January, 2019, were the same as in January 2018.  Zero inflation!  Everyone takes credit for bringing down inflation... "Individual product prices do not necessarily rise at inflation rates.  What inflation means is that the purchasing power of one unit of currency decreases by x% in a year, which is typically measured by looking at a broad spectrum of products in an economy and extrapolating to ""all products"".  So for all products across an economy, the aggregate price of all goods will, on average, be X% higher that they were this time last year.  Some products will be cheaper, some will be more expensive, but on average their prices will rise with inflation rates. For the other part of your question, inflation is an annualized percentage, so an inflation rate of 12% means prices are 12% higher than they were a year ago, so if you extrapolate that linear trend, prices will rise (again, on average) 1% in a month." "Inflation is an attempt to measure how much less money is worth. It is a weighted average of some bundle of goods and services price's increase.  Money's value is in what you can exchange it for, so higher prices means money is worth less. Monthly inflation is quoted either as ""a year, ending on that month"" or ""since the previous month"".  As the values differ by more than a factor of 10, you can usually tell which one is being referred to when they say ""inflation in August was 0.4%, a record high"" or ""inflation in August was 3.6%"".  You do need some context of the state of the economy, and how surprised the people talking about the numbers are.  Sometimes they refer to inflation since the last month, and then annualize it, which adds to the confusion. ""Consumer Inflation""'s value depends on what the basket of goods is, and what you define as the same ""good"".  Is a computer this year the same as the last?  If the computer is 10x faster, do you ignore that, or factor it in? What basket do you use?  The typical monthly consumables purchased by a middle class citizen?  By a poor citizen?  By a rich citizen?  A mixture, and if so which mixture? More detailed inflation figures can focus on inflation facing each quntile of the population by household income, split durable goods from non-durable goods from services, split wage from non-wage inflation, ignore volatile things like food and energy, etc. Inflation doesn't directly cause prices to raise; instead it is a measure of how much raise in prices happened.  It can easily be a self-fullfilling prophesy, as inflation expectations can lead to everyone automatically increasing the price they charge for everything (wages, goods, etc). Inflation can be viewed as a measurement of the ""cost of holding cash"".  At 10% inflation per year, holding a million dollars in cash for a year costs you 100,000$ in buying power.  At 1% inflation it costs 10,000$.  At 0.1% inflation, 1000$. Inflation of 10% in one year, followed by 10% the next, adds up to 1.1*1.1-1 = 21% inflation over the two years.  For low inflation numbers this acts a lot like adding; the further from 0% you get the more the lower-order terms make the result larger.  1% inflation for two years adds up to 2.01%, 10% over two years 21%, 100% over two years 300%, 1000% over two years 12000%, etc.  (and yes, some places suffer 1000% inflation)" Inflation is a reflection on the expansion of the money supply, aka debt,  being created by a central bank. Fiat currencies usually inflate, because there is no limit to the amount of debt that can be created. The consequences of reckless money supply expansion can be seen throughout history, see Zimbabwe, though there have been many others...Brazil, Argentinia, etc...
In general  What does this mean? Assume 10 holidays and 2 weeks of vacation. So you will report to the office for 240 days (48 weeks * 5 days a week).  If you are a w2 they will pay you for 260 days (52 weeks * 5 days a week). At $48 per hour you will be paid: 260*8*48 or $99,840. As a 1099 you will be paid 240*8*50 or 96,000. But you still have to cover insurance, the extra part of social security, and your retirement through an IRA. A rule of thumb I have seen with government contracting is that If the employee thinks that they make X,000 per year the company has to bill X/hour to pay for wages, benefits, overhead and profit. If the employee thinks they make x/hour the company has to bill at 2X/hour. When does a small spread make sense: The insurance is covered by another source, your spouse; or government/military retirement program.  Still $2 per hour won't cover the 6.2%  for social security. Let alone the other benefits. The IRS has a checklist to make sure that a 1099 is really a 1099, not just a way for the employer to shift the costs onto the individual. "(Real) interest rates are so low because governments want people to use their money to improve the economy by spending or investing rather than saving. Their idea is that by consuming or investing you will help to create jobs that will employ people who will spend or invest their pay, and so on. If you want to keep this money for the future you don't want to spend it and interest rates make saving unrewarding therefore you ought to invest. That was the why, now the how. Inflation protected securities, mentioned in another answer, are the least risk way to do this. These are government guaranteed and very unlikely to default. On the other hand deflation will cause bigger problems for you and the returns will be pitiful compared with historical interest rates. So what else can be done? Investing in companies is one way of improving returns but risk starts to increase so you need to decide what risk profile is right for you.  Investing in companies does not mean having to put money into the stock market either directly or indirectly (through funds) although index tracker funds have good returns and low risk. The corporate bond market is lower risk for a lesser reward than the stock market but with better returns than current interest rates. Investment grade bonds are very low risk, especially in the current economic climate and there are exchange traded funds (ETFs) to diversify more risk away. Since you don't mention willingness to take risk or the kind of amounts that you have to save I've tried to give some low risk options beyond ""buy something inflation linked"" but you need to take care to understand the risks  of any product you buy or use, be they a bank account, TIPS, bond investments or whatever. Avoid anything that you don't fully understand." As a former Amazonian, I can tell you that employees are really, really encouraged to get patents. Doesn't matter what for, if your patent application is formally submitted, you get a clear plastic puzzle peace (i have one). If it actually becomes a patent, you get a blue one's  My point is, the fact that they're applying for a patent in X doesn't mean they want to do X, it means that some employee came up with the idea and submitted it to the IP folks who thought, maybe we can patent this thing.  Every company wants a war chest of patents they can use against companies suing them for patent infringement. "You could do nothing for a while longer. Foreign exchange simply means your services are cheaper and imports and more expensive, local transactions are otherwise unaffected. Your main worry is whether the government's attempts to revert these issues will create inflation within Russia.  Local clients will likely not care to pay you in Euros, Dollars, or Pounds (as it will cost them significantly more, they'd have to acquire the currency to pay you with) but does it matter if they pay in Roubles? The financial crisis in more an international thing, not a local one. Now it is possible there will be inflation setting in but I doubt the powers that be will allow that to happen... If you are concerned about it, buying non-liquid assets are the thing to do - a house will still be worth ""1 house"" no matter what a 1-million rouble note will buy you in a year's time. Similarly, you can invest in 'blue-chip' stocks that should be a good hedge against any further inflation (the rich don't tend to turn poor in difficult times!) In the meantime, get some international clients - as the Rouble is so low, relatively speaking, your services are very competitive. The rest of the time, is to wait it out a little - nobody knows what will happen, but in my knowledge of history interest rates like this drop back to something much closer to normal quite quickly." I came up with a real way. I saw once the market be so dumb as to allow this to work. Inflation rate = 2.5%. Home interest rate = 3%. Tax deduction = 1%. Money spent on inflation-adjusted I bonds (at the time these paid 0% net, that is 2.5% gross). Result, .5% profit after accounting for inflation. The kicker: Uncle Sam's I bonds are tax free. Sure it's not possible today, but the rates occasionally drop low enough. Inflation refers to the money supply. Think of all money being air in a balloon. Inflation is what happens when you blow more air in the balloon. Deflation is what happens when you let air escape. Inflation may cause prices to go up. However there are many scenarios possible in which this does not happen. For example, at the same time of inflation, there might be unemployment, making consumers unable to pay higher prices. Or some important resource (oil) may go down in price (due to political reasons, war has ended etc), compensating for the money having less value.  Similarly, peoples wages will tend to rise over time. They have to, otherwise everyone would be earning less, due to inflation. However again there are many scenarios in which wages do not keep up with inflation, or rise much faster. In fact over the past 40 years or so, US wages have not been able to keep up with inflation, making the average worker 'poorer' than 40 years ago. At its core, inflation refers to the value of the money itself. As all values of other products, services, assets etc are expressed in terms of money which itself also changes value, this can quickly become very complex. Most countries calculate inflation by averaging the price change of a basket of goods that are supposed to represent the average Joe's spending pattern. However these methods are often criticized as they would be 'hiding' inflation. The hidden inflation may come back later to bite us. I should have said 'insane inflation related to rising costs versus wages'.  It used to be that wage inflation outpaced product inflation. It's been in reverse for some time, which only exacerbates the problem as it continues.  I'm aware in the manner our economy works some matching or reversal should be expected, but we've been in a downward spiral for the better part of 30 years. "This is the best tl;dr I could make, [original](http://ngdp-advisers.com/2017/09/14/thinking-constrained-phillips-box-get-nightmarish-solutions/) reduced by 75%. (I'm a bot) ***** &gt; Grep Ip has an article: The Fed&amp;#039;s Bad Options for Addressing Too-Low Inflation in which he argues that what looks like a dream economy could be a nightmare for the Fed&amp;acute;s chairwoman.  &gt; The reason being that, according to the Fed&amp;acute;s Phillips Curve precepts to which the Fed subscribes, when unemployment is this low inflation should move up to the Fed&amp;acute;s 2% target.  &gt; Just as it reaped rising inflation by producing a rising NGDP growth trend, lowered inflation by producing a falling NGDP growth trend and kept inflation &amp;quot;On trend&amp;quot; by producing a stable NGDP growth trend, it can raise the level of the stable NGDP growth trend, which it stopped doing in 2010.   ***** [**Extended Summary**](http://np.reddit.com/r/autotldr/comments/70qy24/the_dangers_of_phillips_curve_thinking/) | [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ ""Version 1.65, ~211779 tl;drs so far."") | [Feedback](http://np.reddit.com/message/compose?to=%23autotldr ""PM's and comments are monitored, constructive feedback is welcome."") | *Top* *keywords*: **Inflation**^#1 **Fed**^#2 **growth**^#3 **trend**^#4 **recession**^#5"