How to Understand Cause and Effect of Inflation and Deflation
Watch your home value, which may begin sinking (deflation of home values)., Work on how you can economize rising household and business utilities -- as the suppliers "pass-on" the cost of inflation to the individual who then faces higher prices for...
Step-by-Step Guide
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Step 1: Watch your home value
Millions of Americans have their life-savings sunk/invested in their homes, and the average prices of homes may boom temporarily and/or head downward (deflating) and seem to show weakness as some areas of the economy recover more than others.
A popped bubble may not always re-inflate (recover higher prices) in a short period of time; instead it may take years to get home prices rising near or surpassing previous highs.
Credit is often tight for home-buyers, consumer buying and business investors when there is deficit spending by government.
Average/Middle-class payroll checks, salaries and wages are not rising much, and "under-employment" is common which is when people become employed below their previously better pay-rate standing. , Consider that you individually can not control inflation, but perhaps you can try to manage the costs of household utilities (including water, garbage and sewer) that are related to energy costs as well. , Deflation (sliding dollar value) would likely increase to stay even with inflation of money supply, as the cost rises, for instance, to buy each barrel of oil or other products.
To offset inflation, the oil-producers can raise prices, in turn causing lower dollar values (deflation). , A surge in oil prices could damage prospects for recovery that may be trying to take root in the current economy. , Printing more and more dollars would be called "monetizing" the debt.
This suggests higher inflation and evidently increases economic weakness.
The Fed prints more money than it shreds and replaces.
But, the creditors would then get paid back with money of less value, so some favor that idea. , Get training (as much as possible) to improve value and income.
In the U.S., unemployment was around
9.4 percent for about 2 years, and combined with "under"-employment (working for lower pay) and "discouraged" job seekers are at high levels above 15% .. , This economist said that not only U.S. citizens but Europeans face "another serious crisis in early 2011," with huge short-term debts and many nation-states needing huge bailouts.To help the business and markets, "Confidence is key," said Mark Zandi, chief economist of Moody's Analytics. "If people don't feel good the economy just isn't going to gain traction so it's very very important that people start to feel better about things because until we do the economy is going to struggle."
,, In about 10 to 20 years prices may double, triple, or more.
In the early 21st century, a dollar may be said to be worth around "5 to 10 cents" compared to around a 1960 approximate value of the dollar (depending on the product category), for example: a new auto which might have cost around $2500 would now be about $25,000 or so (that's the 10 cent dollar).
But, a cup of coffee at a shop then was 5 or 10 cents and in 2011 is now $1 or $2 in the U.S.A. and that shows that the dollar is, perhaps, worth about 5 cents, in that category.
Computers are counter-example (outlier) because of great economies and improvements in products that had the original low speed processors costing about $2000 to $3000 dollars in the early 1980s and the hard drives were very small, but very expensive
-- and they actually came down in price with vastly improved speed and capacity.
Today's desktop computer is much faster than the "business mainframe computers" of that era. , -
Step 2: which may begin sinking (deflation of home values).
("2010-09-22Taylor.pdf") , Notice that graph of Government stimulus with much ado and what effect? Taylor said the policy for simulating the economy should be "based on certain established economic principles, including 'predictable, permanent and pervasive incentives' and throughout the economy... consistent with those three principles." -
Step 3: Work on how you can economize rising household and business utilities -- as the suppliers "pass-on" the cost of inflation to the individual who then faces higher prices for energy and other utilities.
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Step 4: Define deflation -- the lowering of dollar values.
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Step 5: Look for your best ways to cut fuel usage
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Step 6: be economical and get better fuel economy on gasoline
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Step 7: oil and natural gas prices.
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Step 8: Examine inflation caused partly by The U.S. Federal Reserve Board (The Fed) printing "extra" money to put it into circulation by loaning it to weak banks to encourage expanding these banks' loans to businesses and for individual (consumer) credit including for home loans to Fannie and Freddie which are government agencies that guarantee and buy U.S. home mortgage loans.
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Step 9: Try to remain employed (perhaps move or change industries) and improve marketable skills and apply knowledge (unused it's equivalent to waste).
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Step 10: Realize that failing economies anywhere could set economies falling around the world.
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Step 11: See state and local governments at the brink of bankruptcy
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Step 12: as State and local governments needed Federal stimulus money in 2009 and 2010 -- depending on the Federal level for bail-outs which is itself in trouble -- including such states as: California
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Step 13: Illinois and New York State to be bailed out by the U.S. taxpayers (government)
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Step 14: by The Fed printing money (monetizing debt/inflating) and loans from abroad
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Step 15: but then have to pay it back which drains all those coffers further.
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Step 16: Consider buying gold and government guaranteed investments
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Step 17: because of the weak U.S. Dollar and weak Euro; many people say that such things are good investments that have residual value.
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Step 18: See some perspective on Inflation
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Step 19: historically
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Step 20: a rate of 3% may be called "creeping-inflation" and then there is sometimes higher inflation that may be around 10% or even more with booms and bursts
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Step 21: typically.
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Step 22: Recall "TARP" stimulus in 2008 as some economists startled the public
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Step 23: convincing the U.S. Presidents and that U.S. Congress (George W Bush and Barack Obama majority Democrat) saying that we were near a "great-depression type of collapse" and had to save the economy with "TARP" and then do more of that in 2009 to bail out the "too large to fail banks and Wall Street companies"?
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Step 24: Measure how much significant stimulus -- increased government spending for purchases -- is shown in the table from economic panic of 2008 through the bottom of that panic rising steeply into 2009 from "Assessing the Federal Policy Response to the Economic Crisis": from Testimony before the Committee on the Budget
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Step 25: United States Senate
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Step 26: John B. Taylor
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Step 27: Economist
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Step 28: Professor
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Step 29: Stanford University and Senior Fellow in Economics at the Hoover Institution.
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Step 30: Consider the table from the Bureau of Economic Analysis which was given to the "U.S. Senate Committee on the Budget
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Step 31: United States Senate" in a presentation by John B. Taylor
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Step 32: Economist
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Step 33: Professor
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Step 34: Stanford University and Senior Fellow in Economics at the Hoover Institution: (See graph above entitled
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Step 35: "Real GDP Growth into Contribution Due to Government Purchases" by Bureau of Economic Analysis) Notice the slow change from flat spending for purchases by the federal
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Step 36: state and local governments (The Government).
Detailed Guide
Millions of Americans have their life-savings sunk/invested in their homes, and the average prices of homes may boom temporarily and/or head downward (deflating) and seem to show weakness as some areas of the economy recover more than others.
A popped bubble may not always re-inflate (recover higher prices) in a short period of time; instead it may take years to get home prices rising near or surpassing previous highs.
Credit is often tight for home-buyers, consumer buying and business investors when there is deficit spending by government.
Average/Middle-class payroll checks, salaries and wages are not rising much, and "under-employment" is common which is when people become employed below their previously better pay-rate standing. , Consider that you individually can not control inflation, but perhaps you can try to manage the costs of household utilities (including water, garbage and sewer) that are related to energy costs as well. , Deflation (sliding dollar value) would likely increase to stay even with inflation of money supply, as the cost rises, for instance, to buy each barrel of oil or other products.
To offset inflation, the oil-producers can raise prices, in turn causing lower dollar values (deflation). , A surge in oil prices could damage prospects for recovery that may be trying to take root in the current economy. , Printing more and more dollars would be called "monetizing" the debt.
This suggests higher inflation and evidently increases economic weakness.
The Fed prints more money than it shreds and replaces.
But, the creditors would then get paid back with money of less value, so some favor that idea. , Get training (as much as possible) to improve value and income.
In the U.S., unemployment was around
9.4 percent for about 2 years, and combined with "under"-employment (working for lower pay) and "discouraged" job seekers are at high levels above 15% .. , This economist said that not only U.S. citizens but Europeans face "another serious crisis in early 2011," with huge short-term debts and many nation-states needing huge bailouts.To help the business and markets, "Confidence is key," said Mark Zandi, chief economist of Moody's Analytics. "If people don't feel good the economy just isn't going to gain traction so it's very very important that people start to feel better about things because until we do the economy is going to struggle."
,, In about 10 to 20 years prices may double, triple, or more.
In the early 21st century, a dollar may be said to be worth around "5 to 10 cents" compared to around a 1960 approximate value of the dollar (depending on the product category), for example: a new auto which might have cost around $2500 would now be about $25,000 or so (that's the 10 cent dollar).
But, a cup of coffee at a shop then was 5 or 10 cents and in 2011 is now $1 or $2 in the U.S.A. and that shows that the dollar is, perhaps, worth about 5 cents, in that category.
Computers are counter-example (outlier) because of great economies and improvements in products that had the original low speed processors costing about $2000 to $3000 dollars in the early 1980s and the hard drives were very small, but very expensive
-- and they actually came down in price with vastly improved speed and capacity.
Today's desktop computer is much faster than the "business mainframe computers" of that era. ,
("2010-09-22Taylor.pdf") , Notice that graph of Government stimulus with much ado and what effect? Taylor said the policy for simulating the economy should be "based on certain established economic principles, including 'predictable, permanent and pervasive incentives' and throughout the economy... consistent with those three principles."
About the Author
Noah Barnes
A seasoned expert in automotive, Noah Barnes combines 11 years of experience with a passion for teaching. Noah's guides are known for their clarity and practical value.
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