The economy moves in waves of boom and bust, with the stock market and the general populace fighting and contributing to this economic cycle.
Just a few years ago, the world was at a peak of economic activity: Businesses were making money, cash was easy to come by, and consumers and businesses were incurring debt because attractive interest rates allowed them to do so.
Then the level of debt became too much to bear and even though people were making good money, confidence in the stability of this system started to erode. And then the economy crashed. Around the world, markets crumbled and governments worked feverishly to keep their economies going. Personal and commercial debt could not be paid back. It was the most depressed economy since The Great Depression. In fact, it was dubbed The Great Recession.
It was sticky for a while. People simply didn't know what to do. Doomsayers predicted the end of the world. Many people lost their jobs and their homes as businesses ran out of money to pay employees and, in turn, people were unable to meet their obligations.
Through it all, the most important thing that people could cling to was that it was a cycle. The economy goes up and down, and even though the "when" is unpredictable, the fact that it does go down and then go back up could be counted on.
And now 2011 is here and the economy is back up again. It's not nearly where it was and many people will have to work for years to regain their eroded retirement funds or are simply overwhelmed by the responsibilities of and commitments to debt recovery.
Unfortunately, there is still one major hurdle to overcome before it can be said that the economy has truly recovered and is on its way to a highly robust period once again. That hurdle is inflation. Here's why it's a problem: When a person or a business goes into a debt, they can declare bankruptcy or they can pay back what they owe through B2C collections and B2B collections.
But when governments face financial challenges – as they did during The Great Recession – many governments solved the problem by printing more money. This is a problem because it increases the amount of money in the marketplace, and as a result, money becomes devalued.
Today, to truly create a healthy economy, governments will need to fight inflation. And then good times will truly be here again.
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