Inflation and Deflation

As an investor, it’s vital to keep note of how the economy is faring when it comes to the purchasing power of the dollar, and the price of goods and services. Depending on the economy’s health and the current political climate, you may have to prepare your wealth for inflationdeflation, or some measure of both.

In the case of inflation, the purchasing power of a certain currency falls. This is usually correlated with the price of goods and services rising, which makes it difficult for consumer consumption to grow. If inflation rises rapidly, we end up with hyperinflation, which occurs when the purchasing power of the dollar decreases exponentially.

In contrast, deflation is when wages and the purchasing power of currency rises, and the price of goods and services are reduced. This usually occurs when productivity is at its peak and there is a decline in demand for goods and services.

Looking at major financial disasters like the Global Financial Crisis of 2008 and the Great Depression, it’s easy to see the considerable impact inflation/deflation can have on a society. So it’s important to keep an eye on the economy’s health so you can appropriately prepare for any kind of financial event.

In this page, you’ll find some interesting perspectives on the steps you could take to help keep your portfolio afloat should inflation or deflation strike.

This Is Why the Aussie Market Soared

With trade war tensions escalating between the US and China, it’s surprising to see that Aussie stocks have powered ahead. Ironically enough, we have a falling Aussie dollar to thank for this.

As Good As It Gets?

The Reserve Bank continues to hold the official cash rate at 1.5%. What’s going on? Is this as good as it gets for the Aussie economy?

The Tipping Point

The US dollar rally has barely paused for breath since getting underway in February. Late last week, it took its toll on commodities. Oil fell nearly 3%. Iron ore fell 3.7%, while aluminium declined 0.7%. What will happen next?

What Could Your Property Be Worth?

Thought about buying a house recently? Or even selling? If you’ve been looking into the real estate market, or simply watching the news over the past decade, you’ll have noticed that housing prices have soared. It also would have been quite difficult for you to miss the housing crisis currently spreading throughout the country.

Why Gold Is Building Towards a Breakout

Right now in Australia, we’re getting low nominal wage growth and increased costs in about everything. That means many Australians are experiencing a reduction in REAL wages. Inflation is coming. It may not hit next month, this year, or even the next. But it’s coming. Which brings me to gold. When the market realises that governments and central banks will put up with higher than expected levels of inflation, it will start moving ‘insurance capital’ into the precious metal.

The Tug-of-War at the Heart of the US Market

Clearly, there has been too much cash in asset markets over the past few years…especially in fixed income markets. But now, the Fed is concerned that this excess cash will show up in consumer price inflation — which is, apparently, a lot worse than asset price inflation. The bond market will feel the biggest impact of this tightening.
Money Morning Australia