Let’s give deflation an official definition. Deflation is a decrease in the average price of goods and services or an increase in the purchasing power of the standard unit of currency. Put more simply, deflation results in consumers able to buy more than they could before with the same amount of money.
Cheaper prices may seem like good news for consumers. Most economists, however, would disagree. Prolonged periods of deflation can result in a recession and can devastate an economy.
If prices mark sustained deflationary levels that strike below the cost to produce goods and services, economic turmoil can ensue with production cuts, payroll reductions and lay-offs.
Deflation is power behind what struck the financial crisis and real estate market in 2008, prices went down. Although prices have recovered a bit in the US housing market, many areas still have not and once again we may see deflation. Oil has dropped substantially with deflationary forces. And now, with Amazon purchasing whole foods, deflation is going to rear its ugly head again in the retail food industry. That added to the fact our real government debt situation is worse than in 2008, we have the potential for serious consequences.
When deflation strikes, the stock market usually follows . . . remember 2008? When will this happen? Who knows, but right before or right after it starts, InterAnalyst will protect our members. We monitor the markets 24 hours a day to keep investors 401k, IRA and other accounts protected against the coming crash. Our protect and preserve alerts helps members lock-in the massive growth our they have earned since 2009.
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Livio S. Nespoli has been a broker, registered investment advisor, and financial publisher since 1985.