In the Federal Reserve’s most recent statement, policy makers indicated that they are willing to take aggressive steps to keep interest rates low and encourage economic growth if the job market and other indicators continue to weaken. This is a further shift away from the central bank’s traditional focus on inflation and it signals an increasing concern about the opposite problem: Deflation.
Deflation is a pernicious enemy, and one that the U.S. economy hasn’t faced since the Great Depression. Not only does deflation diminish nest eggs and other investments as asset values decline, but it can create a vicious cycle. Why would consumers buy goods today when they will probably just be cheaper tomorrow? The FOMC is beginning to recognize that it must attack this problem, but it may be too little, too late.
In the next episode of Money and Markets, airing Thursday, August 26 at 7 p.m. ET, you’ll hear about a strategy for protecting yourself from deflation – and even profiting from it. A special roundtable of asset managers will explain how they’re putting that strategy into action. Plus, a frightening object lesson from Japan, a country that’s been battling deflation, unsuccessfully, for two decades.
Our government may not be able to prevent deflation, but by following this expert advice, you’ll be able to avoid the pain that’s in store for the rest of the economy.
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