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13. What is Inflation

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Published on May 12, 2012

Download Preston's 1 page checklist for finding great stock picks: http://buffettsbooks.com/checklist

Preston Pysh is the #1 selling Amazon author of two books on Warren Buffett. The books can be found at the following location:

http://www.amazon.com/gp/product/0982...

http://www.amazon.com/gp/product/1939...

In this lesson, students learned about the impacts of inflation. By understanding what causes inflation, we can then understand how it destroys the yield of a loan and maintains the value of corporate ownership.

We learned that inflation is generally caused when the government increases the supply of money in the financial system. When this occurs, members of the system have more money to spend and the price of goods and services go up.

This increase in price can drastically destroy a long term investment if the investor doesn't account for the compounding inflation rate.

The most important thing you can learn from this lesson are the two following points:

1. Bonds are completely affected by inflation.
2. Stocks are not necessarily affected by inflation.

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