Seminar and Show information. Please Read March 17, 2016 Money Matters Update

You are invited! Email me or call today to reserve your spot!

 (Must have minimum of $100,000.00 in investable assets to register)  

Money Matters airs Thursday, March 17th, 2016 at NOON PST on KVMR or Moneymanagementradio.com or worldwide on KVMR.ORG

--------------------------------------------------------------------------

Marc's Notes:

Is deflation back in business?

The opposite of inflation where prices rise, deflation is the fall in general price levels.

One would think lower prices would be a good thing and many an analyst agrees the less expensive things are the better off it is for the consumer.

Not all people that study such things agree that deflation is beneficiary and on that side of the aisle lies the U.S. Federal Reserve and central banks everywhere. They believe deflation and overall falling prices causes consumers to hold off purchases waiting for even lower prices sometime in the future.

That delay in purchases by consumers feeds off itself where the decrease in demand causes prices to fall further and consumers hold off even longer waiting for even lower prices still. A vicious cycle of falling prices begets more delays in purchasing and the economy spirals downward.

Opponents to this theory point to history as a guide. When consumer prices fall, consumer can buy more stuff. And consumers can only hold off buying something so long. They agree that a falling price environment will cause an initial delay in purchasing, but believe that eventually normal buying patterns emerge with even more demand as lower prices enable consumers to buy more of everything.

For a real world example, just look at the price of hand held calculators back in the 80’s.

The first Hewlett Packard hand held versions cost well over $800 apiece yet people bought them like hot cakes. As the prices fell over time due to technological and manufacturing improvements, consumers didn’t hold off buying more of them as the deflation theory would lead one to believe.

On the contrary, the lower prices brought more buyers into the markets. Hand held calculator manufacturers saw increasing sales as prices plummeted as more consumers could now afford them.

In a debt ridden society, no one argues that deflation wreaks havoc on debtors, as what one owes doesn’t decrease with overall price levels. What you owe remains the same as debts are fixed contracts with specific amounts written on them.

Compounding the problem is that wages do follow general prices and the fall in wages makes it harder for people to pay off a fixed amount of debt. At least that is what deflation opponents believe.

But the other side of that story is that as consumers see falling prices in the things they buy, they can afford to shuttle more money into debt payments balancing out the equation.

There are indeed two sides of every story and that goes for the deflation/ inflation debate.

One thing is certain. We are have seen massive deflation in many things like the commodity index which tracks the price of basic material such as metal, wood and food stuffs.

You wouldn’t know it by prices in the grocery store. Indeed gas prices have seen massive deflation with gas now in the 2 dollar range, a price we haven’t seen in years, but many other things are rising in price even as the Fed declares deflation is a serious problem.

The central bankers of the world are desperately concerned about deflation and have stated such in their periodic announcements. They have continued their policies to spur inflation.

Their target here in the US set by our monetary authorities is 2% annually and until that level is reached, they state they will continue with programs to arrive at that target.

Considering how much money they have spent on various programs like Quantitative Easing (QE), which now totals into the trillions, and years of ultra-low interest rates, many believe the inflation fires should have started years ago.

That we still don’t see massive inflation is perplexing to both the Fed and many analysts.

Staying firm on their beliefs however, the central bankers will not give up on trying to create inflation and that means should prices continue to fall, more QE and low interest rates will be the order of the day.

Mr. Cuniberti is holding an investment seminar entitled “Investment strategies for today’s markets” on April (date and time and location.  Call (530) 823-2792 or email below to register.