Well you sure heard about inflation right? that's when prices rise and the dollar looses its buying power due to fast growing demand.
Deflation is the exact opposite of that. that's when demand falls so short that prices will have to come down to move products off the shelf. So whats the problem you might ask?
Well 2 fold:
- First of all for existing loans. existing loans which will be paid back in an deflationary environment will be paid back with more expensive dollars then the dollar borrowed, real bad for consumers.
- It will further push economy in a stand still almost stone age like, because nobody wants anything so why would anybody pay you for anything?
A Little bit trivial but not as much as you would like. with talks of economic recession on the horizon and company's cutting back, with interest that low and a tight credit market there is actuial a possibility of deflation.
Idea to capitalize on : Stock up on money and lend it during a deflationary ENVIRONMENT YOU WILL GET BACK DOUBLE ITS WORTH.
You always need money when things go well, and when things do not. When all goes well you want to have asses to cash to capitalize on it. When things do not go so well you need it for security reasons!
Make sure you make the right choice with yours!
Joel Silberstein
Certified Mortgage Planner, CMPS
917.660.3630
joel@joelsilberstein.com
