Who fears fierce inflation?

GDS Modellica
Inflation is one of those macroeconomic indicators that can raise passions among both insiders and outsiders. We quickly associate it with the most dreaded scenario that can happen to an economy, and we sound all the alarms if we approach deflationary figures. It is one of those cursed indicators that seems impossible to master, even though we understand that it should sound like that repeated rhythm in classical music: Allegro ma non troppo. With joy, but without going overboard, without excess, without fanfare.

High inflation raises the cost of living for companies and consumers until adjustments take effect; but low inflation implies an economy with a weak pulse in which capital does not move enough. The blame can be placed on the damn formula VM=PC (velocity x money = price x real growth), but there is no one else to blame but the economic dynamics itself: growth, employment, and abundant and cheap money form a trilemma that is difficult to resolve.

What does all of the above have to do with GDS Modellica? A lot. Inflationary processes, such as the one we are going through, despite the reasonably positive data from last March, are closely linked to fluctuations in the lending circuit. Depending on which phase of the cycle we are in, and the intensity of that phase, it projects scenarios of profits for lenders or creditors, and also represents an element of incentive or contraction for credit activity.

Hand in hand with all these market frictions, where forces that are not always compatible and sometimes antithetical come together, at GDS Modellica, we believe that technology-based companies are the most capable of proposing frameworks for improvement that depict “win-win” scenarios. We believe that the current moment is optimal to bet on innovative firms like ours since our operating environment balances these tensions and allows each party to improve their previous position.

For example, from the perspective of financial institutions, data analysis, machine learning, and artificial intelligence can help improve the assessment of credit risk. This could enable the company to more efficiently identify and mitigate risks associated with inflation, such as the risk of borrower default, and thus reduce losses.

But furthermore, GDS Modellica’s technology is a catalyst for developing flexible financial products that adjust to the changing needs of borrowers, such as inflation-indexed loans. It also allows for diversification of the loan portfolio as an effective strategy to mitigate risks, reducing exposure and balancing income under different economic conditions.

But our contribution also benefits the end consumer. Our track record puts us in a privileged position to support operations with adjustable interest rates, providing greater flexibility and adaptability in an environment of changing conditions. It also allows us to provide guidance from a leadership standpoint in the use of refinancing programs, with the aim of alleviating financial burdens. We can even provide support for any personalized financial management tool, helping institutions assist their clients in tracking their expenses, income, and savings.

In any case, considering the inflationary process we are experiencing, we have deemed it appropriate to bring in our usual infographic format six of the most classical and famous definitions of the term “inflation.” They will not definitively resolve the passionate discussions about whether it is better to have higher or lower inflation, but they serve as a back to basics. After all, calming spirits is always good when we feel that something is “slipping out of our hands.”
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