Surviving the Economic Crisis - The Effects of Deflation

Inflation, and Deflation are dirty words in the World of the economist, high inflation leads to wiping out the value of savings, deflation has the same effect but wipes out fixed assets by devaluing them. In the new post 2008 economy, we expect to experience both.

Deflation for many people who have assets in cash, and a regular income is good news. Companies are forced to lower prices, whilst the cost of assets like a home, land, car, boat or even aircraft decrease, as more people cannot get credit, and afford them.

Another effect of deflation is to lower salaries and wages, which means those with assets, and this regular income will save more, and afford more then before the crisis started. The haves will actually grow "wealthier", whilst those in debt without a high income, will grow materially poorer.

This double edged sword favors those with an income, who do not own toxic or negative assets. People with steady jobs like Government Officials, Police, the Military, Teachers, and people who own debt free businesses, running at a profit. All you need to do is to save, rather than spend, and slowly join this group of people who should be able to invest in the new cheaper homes on the market, and even stocks that will bottom out in price at some stage.

So how do you start benefiting from Deflation?

Make sure you simply save, and go bargain hunting. Life will feel like you can afford that large house, because the price yesterday has dropped to the price of a small affordable house today. The key is a having a steady income, whilst you save to invest in real assets that will become undervalued, considering experts admit property has been overvalued by as much as 40- 80% in some countries like the UK, Spain and the USA.

Turning your savings into cheap tangible assets, that either generates an income or provides you with a buffer against poverty. Is the key to thriving in the new economic climate.

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