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Strategies & Market Trends : Booms, Busts, and Recoveries
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To: tradermike_1999 who started this subject11/7/2002 9:19:46 PM
From: elmatador  Read Replies (1) of 74559
 
Deflation means that everything that you own today, is going to worth less next year. You may have loved deflation in terms you paid for goods made in China or anywhere in the world due to the open (or sort of open if you strip out the quotas and protective measures to defend a few jobs) market the US is.

But now you don't need to pay much for anything new you buy. Technology -plus all those poor countries trying to export their way put of poverty- is making sure prices don't go up. They go down. Yes, you can buy another car for the same price of last year's, but with more goodies in it, but it is worth less and less.

Even that money that you have in the bank is going to be deflated vis a vis other currencies since the USD is ripe for devaluation. It doesn't mean you will be poorer. It is just in the paper you will have less "money" next year.

The easiest way assets to be deflated are stocks. The hardest are salaries. Since salaries are the hardest to deflate, they just sack the employees. It is all happening right in front of our eyes. But thinking again: governments can't be deflated. Had been a possibility for the government machine to be deflated, you wouldn't have a 300 billion budget for "defense" now that the Cold War ended. Even though they can't support themselves anymore -due to the disappearing tax payers that fund them- they keep printing money or borrowing to keep their machine from being deflated. And that's the main cause of the world economy is going down and down.
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