Deflation Concerns

In light of recent events, it should be apparent that the rules of economics will not be thwarted by government intervention. Many have great concerns about hyper-inflation. Some just feel that inflation will continue to be a problem. I however do not see either possibility taking hold in the United States.

The real issue for America will be deflation. As the economy contracts, less money will be available for spending on discretionary items. This will continue to put pressure on jobs and thus result in less spending. The key will be when attitudes toward spending turn from buying on credit to holding what you can. Some areas of the country are already seeing this trend, but as it become more prevalent, the ball will begin to really roll.

In such instances, the best way to prepare is to ensure that you have fewer liabilities. Debt is a vicious enemy in a deflationary cycle as the amount owed will often exceed the value of the asset originally purchased with that credit. Savings and debt reduction are vitally important. It is interesting that this is the last thing the markets and government want of consumers, but consumers rule the markets, despite what "wise" men will tell you.

I also feel that it is imperative that you have emergency supplies available in the event that you become one of the unemployed. Without emergency reserves of cash and food, personal hygiene supplies and similar necessities, life will become very hard for ordinary people.

Take some time to contemplate your position for such times, then act on your needs.

- Mark

Value is based on perception.