About the Winners and Losers in the Coming of Inflation

Publish on August 21st, 2009 | Author: Admin

The longer the financial crisis continues, the evolution more signs that the world moves toward an era of high inflation. The governments of all major countries have spent billions of dollars in ransom for banks and to stimulate the economy. The Federal Reserve and other central banks have diminished interest toward zero. There are no end of the crisis in sight. The securities markets sink again and again after a short time of a bear market rally. U.S. while households have lost nearly 13 billion dollars. The unemployment rate has risen to 8.1 percent in the United States.

The population is concerned about the future and start saving. The savings rate has increased from zero to three percent in the States since 2006. This affects the consumption at a value of around $500 million. Other industrialized countries are facing similar problems. 36 Million workers have lost their jobs in the major industrialized countries.

The endless crisis of closure and the risk of deflation have caused the Federal Reserve and other central banks to exercise the so-called flexible quantitative. Have begun to buy treasury bonds and corporate bonds. The Federal Reserve intends to buy the bonds of around $300 million. The Fed and the central banks of England, Australia and Switzerland have launched its programs of quantitative reduction. This is just another word for print money. The European Central Bank still subject to the same, but it seems a matter of time until its accession.

The policy of the major central banks such as the Federal Reserve and the British will have an impact for the risk of inflation. The risk of inflation is much greater since the start of the policy of quantitative easing. The world will have the markets awash with money newly printed.

The answer to the crucial question is: who belongs to the winners and losers in inflation? To decide on the financial success of the different interest groups.

The winners of the inflation

The winners of the inflation are debtors. The rate of inflation devalues the debt. This frees the countries of the burden of debt that the gigantic stimulation programs have caused. Inflation also relieves all private debtors, since it devalues its liabilities: debtors of mortgages, as well as credit cards. Contributes, in addition, pension funds, because the liabilities of the most pension funds exceeding the assets. Therefore, it is advisable to renew and fix the mortgages now.

Inflation stimulates the consumption and investment. It is best buy and invest today to postpone it, because all becomes more expensive. This is the economic theory. If the policy of quantitative easing successful, could revitalize the economy after the financial crisis. The decade of stagnation in Japan during the 1990’s of the century 20, however, has shown that the decline quantitative and may not result in a long period of stagnation.

If investors are in the winning side of the inflation also means that investments in stock or executions achieve lucrative. The performance of the reservations is generally higher than the rate of inflation and, therefore, resulting in a positive performance.

The losers in the inflation

Savers and lenders are the biggest losers of money. The rate of inflation devalues in cash and the bond yields. That reduces the income of the people who depend on a fixed-income or rent a pension.

The traditional protection against inflation is to maintain a high percentage of cash in gold. Gold is the best currency during the time of high inflation. The bonds linked to inflation or funds offer an alternative common to fixed-income investments. People who can afford to risk a long-term investment of high quality can buy shares or capital funds. The stocks of cars and banks should be left out. The inflation often boost the prices of commodities, therefore, a good fund commodities can be drawn in the review.

More information about how to make money can be read in earn money on Council. The web site also offers free tools for the staff of finance, a link with the best online course free of charge on financial markets and a section with ideas to make money.

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With tags: Tags: central banks, financial crisis, financial success, industrialized countries, inflation, market rally, securities markets, treasury bonds Leave a comment

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