Wall Street Journal says China may get deflation. What is that?
Posted by John Reed on
A WSJ article today says deflation looms in China.
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What flation?
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DEflation.
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Is that the opposite of inflation? In some ways, yes. I actually wrote a book on deflation. But I did not use that word. Why not? Americans do not understand it.
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The book is titled "How to Protect Your Life Savings from Hyperinflation & Depression."
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https://johntreed.com/collections/john-t-reed-s-book-on-hyperinflation-and-depression/products/how-to-protect-your-life-savings-from-hyperinflation-and-depression
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Is depression deflation? Yes.
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So the best "answer" to the question is deflation the opposite of inflation would be is depression the opposite of hyperinflation? Was the US in 1932 the opposite of Weimar Germany in 1922?
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The worst thing to own in inflation is dollar-denominated assets. The worst thing to own in deflation is hard assets. The best thing to own in inflation is a mortgaged home—the home value will keep pace with inflation and the real (after adjustment for inflation) value of the mortgage will fall. The best thing to own in deflation is dollar-denominated assets like cash, high-credit bonds, and high-credit annuities. The worse than worst thing to have in deflation is a mortgage or other debt. Its real value rises. That is, it gets harder to pay by the day.
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Each hurts different kinds of assets. Rich people tend to have assets. Whether they are net better off depends on the mix of their assets. Coupon clippers, savers, and annuitants are toast in inflation. Cash-poor owners of homes, farms, and businesses struggle in deflation.
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What the rich need to do and probably do accidentally is own both, although as a student of all this I have most of my currency-denominated assets in six different foreign currencies
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Poor people tend not to have assets. But they were unemployed in 1932, too. However, they could possibly get a job.
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In both cases, being employed in a NECESSITY-based industry (food, medical care, warmth in winter) is valuable. Also, sad to say, addictions like to nicotine or alcohol are, in this context, necessities to their addicts.
.
What flation?
.
DEflation.
.
Is that the opposite of inflation? In some ways, yes. I actually wrote a book on deflation. But I did not use that word. Why not? Americans do not understand it.
.
The book is titled "How to Protect Your Life Savings from Hyperinflation & Depression."
.
.
Is depression deflation? Yes.
.
So the best "answer" to the question is deflation the opposite of inflation would be is depression the opposite of hyperinflation? Was the US in 1932 the opposite of Weimar Germany in 1922?
.
The worst thing to own in inflation is dollar-denominated assets. The worst thing to own in deflation is hard assets. The best thing to own in inflation is a mortgaged home—the home value will keep pace with inflation and the real (after adjustment for inflation) value of the mortgage will fall. The best thing to own in deflation is dollar-denominated assets like cash, high-credit bonds, and high-credit annuities. The worse than worst thing to have in deflation is a mortgage or other debt. Its real value rises. That is, it gets harder to pay by the day.
.
Each hurts different kinds of assets. Rich people tend to have assets. Whether they are net better off depends on the mix of their assets. Coupon clippers, savers, and annuitants are toast in inflation. Cash-poor owners of homes, farms, and businesses struggle in deflation.
.
What the rich need to do and probably do accidentally is own both, although as a student of all this I have most of my currency-denominated assets in six different foreign currencies
.
Poor people tend not to have assets. But they were unemployed in 1932, too. However, they could possibly get a job.
.
In both cases, being employed in a NECESSITY-based industry (food, medical care, warmth in winter) is valuable. Also, sad to say, addictions like to nicotine or alcohol are, in this context, necessities to their addicts.
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