Is the Opposite of Inflation – Deflation?

(I-Newswire) July 30, 2010 - Headlines lately have been announcing the arrival of deflation. Some might think the opposite of inflation would be a good thing. But according to those in the know: Not when prices on almost everything unilaterally drop.

Dennis Tubbergen, CEO of USA Wealth Management LLC, a federally registered investment advisory company, is concerned with the prospect of deflation and the impact it will have on our already depressed economy. He notes that for inflation to exist, people have to be spending money, which they are not. Tubbergen believes the excess debt in the economic system is responsible for the current ‘deflationary’ period we are now facing.

Investopedia defines ‘deflation’ this way: Declining prices, if they persist, generally create a vicious spiral of negatives such as falling profits, closing factories, shrinking employment and incomes, and increasing defaults on loans by companies and individuals.

That pretty much sums up today’s economic climate.

In a July 20, 2010 article by Rick Newman for USNews.com, Newman talks about the possibility of deflation existing today and states, “When the price of everything drops, it’s an alarming development that portends stagnation.” Newman goes on to give four reasons for deflation being a problem: 1) Once it arrives, deflation is hard to cure; 2) The mere fear of deflation can cause it; 3) Falling prices can be ruinous; and 4) Preventing deflation is tricky.

Dennis Tubbergen refers to a Bloomberg Radio interview earlier this year with Julia Coronado, a senior U.S. economist at BNP Paribas in New York. “Disinflation is going to be with us for awhile,” said Coronado. “That’s going to allow the Fed to stay on hold for a lot longer than the market is expecting.”

While Tubbergen calls ‘disinflation’ a nicer-sounding word than ‘deflation,’ the outcome is essentially the same – falling prices and subdued consumer spending.

“Unfortunately, I believe a period of deflation could have a negative effect on U.S. equity markets through 2012,” concludes Tubbergen.

For more information on Tubbergen’s views, visit www.dennistubbergen.com.


The opinions expressed herein are those of the writer and not necessarily those of USA Wealth Management, LLC. This update may contain forward-looking statements, including, but not limited to, statements as to future events that involve various risks and uncertainties. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual events or results to differ materially from those that were forecasted. Therefore, no forecast should be construed as a guarantee. Prior to making any investment decision, individuals should consult a professional to determine the risks, costs, benefits and fees associated with a particular investment. Information obtained from third party resources is believed to be reliable but the accuracy cannot be guaranteed.

About USA Wealth Management, LLC:
Wealth managment, financial advisors.

Company Contact Information
USA Wealth Management, LLC
Joy VanOeffelen
50 Louis St. NW
Grand Rapids, MI
49503
Phone : 866-879-0137, Ext. 3