Depression and Deflation

This video talks about the deflation depression that is hitting our world according to Robert Prechter. The dollar has been rallying and the CPI is at a 44 year low. Deflation may sound beneficial to some people however it has a very bad influence on the economy. Deflation puts rich and big countries at a risk. Deflation increases the real burden of consumer’s and government’s debts.

This video is important because it gives people tips on how to react to deflation. When deflation occurs, all your assets go down in value so as result, you lose money. Prechter suggests that the safest way to solve this problem is to invest in treasury bills or any funds that invest only in treasury bills. Treasury bills have no interest payments but they are sold at a marked down price. He also suggests that during deflation, keeping actual cash is also not a bad idea however there are some concerns with keeping money in bank because of what happened to many banks in 2009.

As deflation occurs, next to come, is credit implosion that will destroy the value of stocks, commodities and especially real estate. The biggest area of overvaluation because of credit extension is the real estate area. When this next phase of "deflationary depression" happens the only investment advice is: "Make sure as an individual you're in the safest possible investments so you can ride this out".