Deflation - is when the prices of goods and services fell. Low prices mean that the consumer can buy more. And seemingly, deflation - is good for the economy. But not all so simple - based on AMarkets.
It is worth pondering, as the expectation of lower prices affects consumer behavior. Consumers are holding cash, not spending savings - they are waiting for that tomorrow or the day after prices fall and there is no need to rush into buying. If the consumer is not spending - the economy loses money at the moment.
This is a dangerous deflationary vicious circle, which always leads to a slowdown in GDP growth. It should be borne in mind that deflation is always accompanied by a key economic depression in history. Deflation, transfered into depression always goes hand in hand with over-production of goods, the growth of debt.
Deflation is beneficial to those who give money to debt. And do not favor those who take the money debt. The conclusion is simple - it is good to take out smaller loans, and less contact with a variety of muddy credit schemes and tools. But in debt to give, on the contrary, advantageous. In a deflationary environment favorable to buy long-term treasury bonds - offer Newsmax analysts.
Currently, the interest rate in the US is very low when compared with historical values. If we assume that the Fed will raise rates will be afraid, and it will remain low, the duty paid in the future by the Federal Reserve, can be considered a good investment.