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Lets talk about Inflation so that you can understand exactly what’s going on, how this works, what this means for you, and how you can USE THIS INFORMATION to – most importantly – not lose any money. Enjoy! Add me on Instagram: GPStephan
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Now, what initially caught my attention was this headline right here:
“The Fed is expected to make a major commitment to ramping up inflation soon”
Well…all of it really comes down to a term known as DEFLATION. This is, as you would expect…the OPPOSITE of inflation. This is what happens when the price of everything around us GOES DOWN, and all of a sudden – the longer we wait to buy something, the cheaper it becomes because our money has more purchasing power.
In a DEFLATIONARY economy, the prices of goods and services are going DOWN…so, every month, things become cheaper to buy, and if you just HOLD ON to your money…you’ll feel good knowing that it’ll be worth MORE the longer you DON’T SPEND IT.
BUT what REALLY ends up happening is that people just STOP spending money, because they know that money is just going to go up in value, so they hold off from buying anything. That causes demand for those goods and services to drop, which further causes people to spend less money, which causes businesses to scale back because they aren’t making as much money, which causes people to lose their jobs or take reduced salaries, and now because they don’t have as much money to spend, they don’t spend anything…and that sends everyone into another, far deeper recession.
Inflation, on a small, controlled scale…is a REALLY, REALLY GOOD THING. If people know their money is going to be worth just SLIGHTLY LESS in the future…it’s going to incentivize them to spend it, because if they wait too long – their money is going to be worth less. That’s good for our economy, it’s good for business, and it’s good for wages because employers can generally afford to pay a little more as their revenue increases a little more over time.
In the SHORT TERM, deflation could very well happen because businesses are shut down, people are still stuck inside, and no matter how much money the FED introduces into the economy – there needs to be a viable way for people to spend it, otherwise if you print money and just hold on to it – it’s almost as though it doesn’t exist. OR…if you have nowhere to spend it, and you just INVEST your money instead…then the INVESTMENTS begin to rise in value.
That leads ME to believe that the BEST thing to do in the SHORT TERM is make sure you have enough saved up to cover 6-9 months worth of your expenses as an emergency fund, preferably held in a high interest savings account – and then, just continually invest consistently into REAL assets like stocks and real estate that should rise on par with inflation long term. That’s it. Some people also say GOLD…but I’m still not a fan of precious metals LONG TERM, and since I’m a long term investor – I like something I can hold on to for 20-30 years and not worry about it under-performing.
But remember, in the short term – anything is possible, and the stock market is just as likely to go down as is it to go up – I have no idea, I’m not psychic, and timing the market like this is a terrible idea. BUT…given the last 100 years of data available to us…investing in the markets over a 20 year period has never ONCE produced a negative result, and that’s likely the best choice of action if you believe we’re going to see much quicker inflation once our economy begins re-opening.
For business or one-on-one real estate investing/real estate agent consulting inquiries, you can reach me at GrahamStephanBusiness@gmail.com
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