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Inflation is Coming…Where Should You Invest? Part I

Posted on | January 24, 2009 | 10 Comments

Inflation is a term you rarely hear in the news today.  Actually, the polar opposite is what is currently being discussed: deflation.  Since 2001, the United States has seen a rise in the price of goods and services and especially commodities like oil, gold and copper.  When the global financial panic of 2008 struck, every investment vehicle was liquidated including commodities causing most to think that we were in a deflationary period. Inflation and deflation are terms that are solely monatery; meaning that inflation is not just a rise in prices, but a rise in prices driven by an increasing money supply.

If the price of a home goes up because a large corporation has decided to relocate in that town, that is not inflation, it is supply and demand.  We must understand the difference.  The same holds true for deflation.  Just because there is a decline in prices does not mean that deflation has occurred.  Let’s use the same home value example.  If a large corporation has decided to close in the same town and the price of the home goes down, that is not deflation.  Once again, that would be supply and demand.

So, why would the government tell us that we are seeing deflation?  With the economy in a known recession, it is much easier for government officials to release reports stating the the price of goods and services are down so there is deflation which will make OUR money go further.  This is not true!  Once again, the government is feeding the United States citizens a bunch of crap.  Deflation is solely a monetary term.  Without a shrinking money supply there is no basis for labeling this period deflationary.  The opposite is actually true.  The government is INCREASING the money supply by lowering rates and printing as many US dollars as the printing press will produce in one day.  Wouldn’t this be considered INFLATIONARY?

Part II of our inflation essay will be available later this week, so check back into Subprime Blogger to find out where you should put your money in a time of inflation.

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Comments

10 Responses to “Inflation is Coming…Where Should You Invest? Part I”

  1. Allen Taylor
    January 24th, 2009 @ 4:01 pm

    Nice writing. You are on my RSS reader now so I can read more from you down the road.

    Allen Taylor

  2. » Subprime Blogger » Inflation is Coming…Where Should You Invest? Part I » Subprime Mortgage Refinance
    January 24th, 2009 @ 8:24 pm

    [...] news by unknown « Top 10 States With The Highest Level of Federal Land Ownership [...]

  3. Tom Human
    January 25th, 2009 @ 2:09 am

    But wait. The price of gas is down. It seems like clothing and especially electronics are always on sale…

    If there’s inflation, what’s getting more expensive?

  4. James
    January 25th, 2009 @ 7:01 am

    De-fla-tion n. – A persistent decrease in the level of consumer prices or a persistent increase in the purchasing power of money because of a reduction in available currency and credit.

    The other issue you are ignoring is the ‘available’ part of the definition. Just because the government has increased the supply of money to banks, doesn’t mean it reaches the general populace, that takes time. Until then, the monetary supply hasn’t actually increased. (Though it’s a very sure bet, it will)

  5. Douglas
    January 25th, 2009 @ 10:13 am

    A few weeks ago Donald Trump said…”It does not matter if you are broke or a billionaire, the banks are not loaning one penny”. This is what some say is the calling in of loans. During this period of credit freeze the banks and the fractional reserve banks only take in money. This in tern reduces the amount of money or credit in circulation which created a term of deflation.

    In order to maximize their profits and buying power, the Feds behind closed doors forced executive orders to use American tax dollars to bail out their buddies who got nabbed in the bubble burst.

    How will Obama stimulate the economy? Not by dishing out more FAKE Feds notes. This will create inflation. Obama must use our REAL money, our tax money. Congress has watched the Feds buddies squander and monopolize markets using bailout tax money. Now Obama and Congress must give the rest back to the people who made it REAL money.

    This is where the Feds got us by the balls. The more of the REAL money the Government does not give back to their unconstitutional organized crime, the less credit they will issue. So, now Obama will have to do what Washington did, print the Continentals, or what Lincoln did, print the Greenbacks. In short, give the tax money back to the people to stimulate the economy, decommission the Federal Reserve, start printing NEW currency managed and directed by Congress on behave of their constituents. So give back REAL tax money to help REAL people and Congress issues NEW money to create NEW jobs.

    The Feds create FAKE money to finance bubbles. The Feds create FAKE money so Americans can buy goods from other countries who are also in debt to the private central bankers. Insanity!

  6. rex webster
    January 25th, 2009 @ 5:57 pm

    thanks for the stories – you are on target……reverend rex

  7. Subprime Blogger » Inflation is Coming…Where Should You Invest? Part II
    January 26th, 2009 @ 7:21 pm

    [...] Saturday, we started exploring the notion that inflation is coming.  When considering that inflation and deflation are solely monetary terms, it seems obvious that [...]

  8. breckandy
    January 27th, 2009 @ 11:57 am

    Deflation is King for the moment. Go into a Home Depot where it is like a ghost town with more employees waiting on you hand and foot, than there are customers.
    A 2×4 is half what it cost 2 years ago.

    Construction spigot is off. When the pent up demand for Real Estate lets loose in a year or 2 and inflation kicks in, watch out.
    Good news is that for the people who have modified or refi’d their mortgages will be paying off their loans with very inflated dollars.

  9. Subprime Blogger » What Will Inflation Do to Mortgage Rates?
    January 30th, 2009 @ 7:13 pm

    [...] Inflation is Coming…Where Should You Invest?  Part I [...]

  10. Subprime Blogger » Best Investments During an Inflationary Period
    February 13th, 2009 @ 9:20 pm

    [...] Inflation is Coming…Where Should You Invest?  Part I [...]

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