{"id":1667,"date":"2022-02-05T05:21:29","date_gmt":"2022-02-05T09:21:29","guid":{"rendered":"https:\/\/www.saudercpa.com\/blog\/?p=1667"},"modified":"2022-02-04T22:41:32","modified_gmt":"2022-02-05T02:41:32","slug":"if-inflation-conditions-where-will-your-business-be-segment-iii","status":"publish","type":"post","link":"https:\/\/www.saudercpa.com\/blog\/2022\/02\/05\/if-inflation-conditions-where-will-your-business-be-segment-iii\/","title":{"rendered":"If Inflation Conditions Where Will Your Business Be? (Segment III)"},"content":{"rendered":"

Preface: \u201cIf I have ever made any valuable discoveries, it has been due more to patient attention, than to any other talent\u201d<\/em>
\n\u2015\u00a0Isaac Newton<\/span><\/em><\/p>\n

If Inflation Conditions Where Will Your Business Be? (Segment III)<\/strong><\/p>\n

Entrepreneurs looking for the truths of inflationary business navigation should consider that most research points to a clear correlation between commodities prices and the measurement of inflation trends with the consumer price index. The consumer price index incorporates a number of goods, food at home, food away from home, energy, gasoline, new vehicles, used vehicles, electricity, and commodities.\u00a0<\/span><\/p>\n

Historically, trends in commodity indexes have consistently correlated closely with inflation while typically uncorrelated with equity and bond market trends say. The phrase “commodity business” is often highly partisan, yet entrepreneurial participants in commodity products such as corn or wheat, cotton or coffee, sugar or lumber – should generally welcome economic developments with an <\/span>inflationary trend towards a brighter future. Given this historic hinge, commodity-based businesses may continue to gain perspective altitude should inflation persist and its momentum elongates.<\/p>\n

Considering that in the early 80s, when inflation was effectively reigned in, when Fed Chairman Volcker increased the prime-rate at a rocket fuel rate, creating a host of changes for commodity entrepreneurs from the mid-west corn belt to mining enterprises. The decade following for those highly leveraged in certain industries were perhaps not the best of years. Today unlike variables again prevail for stakeholders in the commodity complex, including but not limited to thee following, tax legislation, expansion in monetary aggregates, monetary controls, and supply logistics.\u00a0<\/span><\/p>\n

Firstly, every taxpayer is a commodity stakeholder, from fuel or food purchases say. So the marginal pressure in higher operating costs transfers the pricing baton from one stakeholder to the next, i.e., one business’s expenses are another revenue. Another example is as the cost of new construction increases from raw materials of say lumber or steel, this flywheel creates more income for those sourcing those goods from inventories at the higher value, say? Secondly, say for some crypto speculator, $50.00 per bushel wheat would likely not be enough incentive to purchase a farm and learn to drive a tractor or combine. <\/span><\/p>\n

Therefore, despite the higher cost of toast for breakfast, and the corresponding lack of incentives to fix the logistics of a supply chains with that commodity scenario, is would likely not be resolved from a computation of a few more algorithms to manufacture $$$M of virtual currency.\u00a0\u00a0<\/span><\/p>\n

Concerningly, leading economic spoke-persons have repeated said that inflationary pressures are transient. If inflation is a trend with monetary motion, we should perhaps consider a snippet of\u00a0 historic wisdom from Sir Isaac Newton – Newton’s first law of motion. In Newton’s first law, an object will not change its motion unless a force acts on it. Further, In the second law, the force on an object is equal to its mass times its acceleration. In the third law, when two objects interact, they apply forces to each other of equal magnitude and opposite direction.\u00a0<\/span><\/p>\n

The point of referencing Newton’s laws is that after $$.0T of the monetary motion says to restart the economy since the Pandemic shutdowns, there has been a lot of monetary acceleration in asset prices. What is the affordability of a reprise? Bottom-line, any intentional effort short of gradual decreases in acceleration will create visible challenges for entrepreneurs, i.e., why would anyone entrepreneur with momentum want inflation to slow, yet?\u00a0<\/span><\/p>\n

Shifting to logic -for those who enjoy math, let’s reflect on the following.\u00a0<\/span><\/p>\n

https:\/\/www.omnicalculator.com\/math\/exponential-growth<\/span><\/a><\/p>\n

Consider the following problem: the population of a small city at the beginning of 2019 was 10,000 people. It was noticed that the population of the city grows at a steady rate of 5% annually. What should you do to calculate the\u00a0<\/span><\/em>projected <\/em>population size<\/em> in the year 2030? From the given data, we can conclude the initial population value, x0<\/sub><\/span><\/em>, <\/span><\/em><\/strong>equals 10,000<\/em>. Also, we have the growth rate of\u00a0<\/span><\/em>r = 5%<\/span><\/em><\/strong>.<\/span><\/em><\/p>\n

Therefore, the exponential growth formula we should use is:<\/span><\/em><\/p>\n

x(t) = 10,000 * (1 + 0.05)t = 10,000 * 1.05t.<\/span><\/em><\/p>\n

Here t is the number of years passed since 2019. In our case, for the year 2030, we should use\u00a0<\/span><\/em>t = 11<\/span><\/em><\/strong>\u00a0since this is the difference in the number of years between 2030 and the initial year 2019. Finally, we get:<\/span><\/em><\/p>\n

x(11) = 10,000 * 1.0511 = 17,103.<\/span><\/em><\/p>\n

So, the projected number of inhabitants of our small city in the year 2030 is around 17,103.<\/span><\/em><\/p>\n

\u2026\u2026..There are numerous cases where the formula for exponential growth and decay is used to model various real-world phenomena:<\/span><\/em><\/p>\n