Get Ready For Rising Or Dropping Prices?
Tuesday, April 22nd, 2008 Subscribe To Our Feed
Sound business planning is essential in any business. Some companies are better than others of course; for instance, Toyota’s planning exceeds 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 savvy business planning will lead to greater success.
Personal planning is similar to business planning. A successful life can be had with the right personal planning. For instance, if real estate values continue to fall, a first time home buyer should wait until prices reach bottom. But if prices are going to go up rapidly, now would be the time to make a purchase. Planning the budget, future expenditures, and proper investments are an important part of a winning strategy.
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 need we continue this road to the bitter end? Will Bush’s depression end in a hyperinflationary or deflationary disaster? In the early 1920’s Weimar Germany followed this course until their money, the Mark, was totally worthless. In 1914 the Mark’s worth was about 4.2 Marks to equal one US dollar. It began falling and in 1920 it took nearly 39.5 Marks to equal one US dollar. The downward trend continued until November 1923 it took 2.4 trillion Marks to equal one US dollar.
By December of 1923 the Mark was totally without value and was replaced. This is a prime example of a country’s money that experienced hyperinflation to the point of worthlessness. The big concern regarding hyperinflation is if it is necessary to add to the escalation 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 focused on the rapidly raising costs. Paul Volcker, changed the path from a hyperinflationary one that the country was going down.
Unfortunately we seem to have found our way onto this course again 28 years hence. Will we be able to slow the momentum in time or will like Weimer Germany in the 1920’s? Will cheap auto insurance become not so cheap? Will all prices go to absurd levels? Can we prevent it and if so, when and how? Stay tuned.
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