Inflation or Deflation Ahead?
Proper business planning is essential in any business. Some companies are better than others of course; for instance, Toyota's planning is superior to the U.S. automaker's planning. Toyota used innovative technology and began to introduce high mileage hybrids when the cost of gasoline began to rapidly rise. This type of proper business planning will lead to greater success.
Personal planning is similar to business planning. A successful life can be experienced with proper personal planning. Planning the budget, future expenditures, and proper investments are important part of successful planning.
The U.S. happens to be engaging in a hyperinflationary path today. What this means is the Federal Reserve is loaning billions of dollars to ailing banks. This causes many economical problems such as inflation. Many believe inflation to be the rise of prices; actually it is a devaluation of money due to dilution. When Ben Bernanke gave his infamous helicopter speech it was stated that the Federal Reserve can dilute the value of a country's money when they feel the need.
Currently, we are on a hyperinflationary path. But do we have to follow that path to its ultimate end like happened to Weimar Germany in the early 1920's? The answer is no. That was an example of a hyperinflation that continued to the point of the currency becoming totally worthless. In 1914 it took about 4.2 German Marks to equal one US Dollar. By 1920 it too about 39.5 Marks to equal the value of one US Dollar. By July, 1921, it took a little more than 76 Marks to equal one US Dollar. July 1922, 493 Mark to One US Dollar. July 1923, 353,412 Marks to equal one US Dollar. October of the same year, 25.26 billion Marks to equal one US Dollar. By November of that same year, 2.4 trillion Marks to equal one US Dollar!
By December of 1923 the Mark was completely worthless and was replaced. This is a prime example of a country's currency that experienced hyperinflation to the point of worthlessness. The big question regarding hyperinflation is if it is necessary to add to the continuation of prices until it reaches infinity? No. In the late 1970's the U.S was on an inflationary path. This could have continued with more and more currency being created; however, the attention was drawn to the rapidly raising costs. Paul Volcker, changed the path from a hyperinflationary one that the country was on.
Unfortunately we seem to have found our way to this path again 28 years later. Will we be able to stop the momentum in time or will like Weimer Germany in the 1920's? Can we stop it and if so when and how?
Those are very good question. There was a recent news story about riots in Haiti over rapidly rising food prices. Already, five people have been killed. Sometimes the public gets very upset with rising prices. Sometimes the public doesn't. Sometimes hyperinflations are halted. Sometimes they aren't.
When will today's hyperinflationary path change courses? I would like to know the answer to that. Rapidly rising home prices didn't seem to cause much complaint from the public; of course those who owned homes already didn't notice this.
All ships will rise with the rising tide. It is nearly impossible for home prices to rise with the prices of food, gasoline, clothes and everything else falling. My best guess right now is that the hyperinflation will continue for now and when the prices of homes begin to raise again the public will see it as a good thing.
Riots and deaths over rising prices of food and gasoline usually is impetus to hyperinflation coming to an end.
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About the Author
J Stromsteen has many years experience in the finance and insurance industry. She writes for the website Bush's Depression as well as first time home buyer to comment with up to date information on the unfolding subprime mortgage crisis.
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by: JStromsteen
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