http://www.profitableinvestingtips.com/investing-tips/investing-during-deflation-of-the-us-economy Investing During Deflation of the US Economy Recent comments by Fed chairman Bernanke indicate that the US Federal Reserve will continue its $85 Billion a month bond buying program. The cited concern is persistently low inflation. The objective of the Fed is to keep inflation above 2% as one of their concerns is economic deflation. Just what is deflation and if things go badly how does one go about investing during deflation of the US economy? Deflation: 1. A decrease in the general price level of goods and services 2. An inflation rate less than zero 3. An increase in the real value of money 4. An economic circumstance in which one can buy more goods with the same quantity of money The Problem with Deflation During periods of deflation cash is king. Deflation makes you richer if you have money in the bank and poorer if you have extensive debt. An advantage of having a slow and steady rate of inflation is that homes and businesses become more valuable over time and the debt taken on to purchase them becomes less of an issue. The reverse happens in deflation when your home and business become cheaper in relation to cash and your debt can become overwhelming. Investing During Deflation the US Economy If the US economy heads into a period of deflation you want to be holding cash and you want to reduce your debt. Negative interest rates are a possibility. That is to say the bank may want to charge you for holding your money. Fundamental analysis of investments needs to take this into consideration. Companies with lots of cash will be popular as will high paying dividend stocks. Dividends will in fact need to keep up with the diminishing value of stocks as related to the value of cash. Are We Heading into Deflation? Historically deflation is not only possible but common. The USA had long periods of deflation during the 19th and early 20th centuries before the creation of the Federal Reserve. In the current day the concern is of a reduction in demand for goods and services which will lead producers and sellers to drop prices to continue sales. This happened in Japan twenty years ago and the Asian nation is just coming out of two decades of economic stagnation. The policy of the Fed regarding bond purchases is to keep interest rates down and help the economy recover. Buy pumping money into the system it also tends to increase demand for products and services. To the extent that the Fed reduces its bond purchasing stimulus program there might be a consumer and business retrenchment that could drive down prices. Businesses would compete for business on a price level and the USA could see deflation. Investing during deflation of the US economy would best be as detailed above. However, they call them economic cycles for a reason.

1. Investing During Deflation
of the US Economy
By: www.ProfitableInvestingTips.com

2. Recent comments by Fed
chairman Bernanke indicate that
the US Federal Reserve will
continue its $85 Billion a month
bond buying program. The cited
concern is persistently low
inflation.
By: http://www.profitableinvestingtips.com/investing-tips/investing-during-
deflation-of-the-us-economy

3. The objective of the Fed is to keep
inflation above 2% as one of their
concerns is economic deflation.
Just what is deflation and if things
go badly how does one go about
investing during deflation of the
US economy?
By: http://www.profitableinvestingtips.com/investing-tips/investing-during-
deflation-of-the-us-economy

4. Deflation:
By: http://www.profitableinvestingtips.com/investing-tips/investing-during-
deflation-of-the-us-economy

5. A decrease in the general price
level of goods and services
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deflation-of-the-us-economy

6. An inflation rate less than zero
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deflation-of-the-us-economy

7. An increase in the real value of
money
By: http://www.profitableinvestingtips.com/investing-tips/investing-during-
deflation-of-the-us-economy

8. An economic circumstance in
which one can buy more goods
with the same quantity of money
By: http://www.profitableinvestingtips.com/investing-tips/investing-during-
deflation-of-the-us-economy

9. The Problem with Deflation
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deflation-of-the-us-economy

10. During periods of deflation cash is
king. Deflation makes you richer if
you have money in the bank and
poorer if you have extensive debt.
By: http://www.profitableinvestingtips.com/investing-tips/investing-during-
deflation-of-the-us-economy

11. An advantage of having a slow and
steady rate of inflation is that
homes and businesses become
more valuable over time and the
debt taken on to purchase them
becomes less of an issue.
By: http://www.profitableinvestingtips.com/investing-tips/investing-during-
deflation-of-the-us-economy

12. The reverse happens in deflation
when your home and business
become cheaper in relation to cash
and your debt can become
overwhelming.
By: http://www.profitableinvestingtips.com/investing-tips/investing-during-
deflation-of-the-us-economy

13. Investing During Deflation the
US Economy
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deflation-of-the-us-economy

14. If the US economy heads into a
period of deflation you want to be
holding cash and you want to
reduce your debt. Negative interest
rates are a possibility. That is to
say the bank may want to charge
you for holding your money.
By: http://www.profitableinvestingtips.com/investing-tips/investing-during-
deflation-of-the-us-economy

15. Fundamental analysis of
investments needs to take this into
consideration. Companies with
lots of cash will be popular as will
high paying dividend stocks.
By: http://www.profitableinvestingtips.com/investing-tips/investing-during-
deflation-of-the-us-economy

16. Dividends will in fact need to keep
up with the diminishing value of
stocks as related to the value of
cash.
By: http://www.profitableinvestingtips.com/investing-tips/investing-during-
deflation-of-the-us-economy

17. Are We Heading into Deflation?
By: http://www.profitableinvestingtips.com/investing-tips/investing-during-
deflation-of-the-us-economy

18. Historically deflation is not only
possible but common. The USA
had long periods of deflation
during the 19th and early 20th
centuries before the creation of the
Federal Reserve.
By: http://www.profitableinvestingtips.com/investing-tips/investing-during-
deflation-of-the-us-economy

19. In the current day the concern is of
a reduction in demand for goods
and services which will lead
producers and sellers to drop
prices to continue sales. This
happened in Japan twenty years
ago and the Asian nation is just
coming out of two decades of
economic stagnation.
By: http://www.profitableinvestingtips.com/investing-tips/investing-during-
deflation-of-the-us-economy

20. The policy of the Fed regarding
bond purchases is to keep interest
rates down and help the economy
recover. Buy pumping money into
the system it also tends to increase
demand for products and services.
By: http://www.profitableinvestingtips.com/investing-tips/investing-during-
deflation-of-the-us-economy

21. To the extent that the Fed reduces
its bond purchasing stimulus
program there might be a
consumer and business
retrenchment that could drive
down prices.
By: http://www.profitableinvestingtips.com/investing-tips/investing-during-
deflation-of-the-us-economy

22. Businesses would compete for
business on a price level and the
USA could see deflation. Investing
during deflation of the US
economy would best be as detailed
above. However, they call them
economic cycles for a reason.
By: http://www.profitableinvestingtips.com/investing-tips/investing-during-
deflation-of-the-us-economy

23. Into Deflation and Out Again
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deflation-of-the-us-economy

24. Anyone investing during deflation
of the US economy would need to
remember that the Fed would
likely resume monetary policies
that would drive the economy
back into an inflationary trend.
By: http://www.profitableinvestingtips.com/investing-tips/investing-during-
deflation-of-the-us-economy

25. That means that the old blood in
the streets adage could apply. Wait
for things to look darkest and then
use your strong dollars to buy
property or stocks in preparation
for an inflationary and profitable
surge of the economy.
By: http://www.profitableinvestingtips.com/investing-tips/investing-during-
deflation-of-the-us-economy

26. A conservative approach would be
to diversify your investment
portfolio to cover the risk of
deflation and prepare for an
inflationary comeback.
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deflation-of-the-us-economy