Lets discuss the effects of inflation and the $2 trillion dollar stimulus package that was just passed, and what this means for our money – enjoy! Add me on Instagram: GPStephan
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So what causes Inflation?
-The first is due to increased demand, and not enough production.
-The second cause is due to an increase of production cost in making an item.
-The THIRD source of inflation is known as “Built-In,” because it’s CAUSED by the prices of goods going up, to the point where people need to make more money to pay for them…which begins the cycle all over again.
Now, here’s the thing…in small doses, inflation is generally ENCOURAGES, and – when it’s under control – it can be a GOOD THING. The United States has done their best to maintain a safe, stable, and consistent amount of inflation annually, that – over the last 25 years, has generally hovered around 2-3% per year.
For some people, that’s great – it means that inflation causes certain assets, like stocks, commodities, and real estate, to rise in value with inflation…so, if inflation goes up 3% in a year, so does your investment. Other people say moderate inflation is necessary to keep our economy going, because – if we KNOW our money is going to lose a little value every year – it encourages us to either spend or invest it back into our economy, which keeps us growing.
HOWEVER…other people could see inflation as a negative, because – if they’re holding onto VAST sums of cash, their money will have less and less purchasing power every year they don’t spend it. It also means that those very same stocks, commodities, and real estate will cost MORE to buy in the future as they rise in value with inflation…and that means, you’ll need more money to buy them.
But, overall – in MODERATION, a STEADY, CONSISTENT inflation rate is generally seen as a healthy indicator of our economy, because people know what to expect, businesses can plan accordingly, and it’s slow enough that most of us won’t notice any major change day by day. That’s why the United States tries to aim for as close to 2% annual inflation as possible.
We can also look back just 11 years ago to the stimulus passed in 2009, known as the American Recovery and Re-Investment Act. This, at the time, was a nearly $800 billion dollar stimulus to help lift us through the Great Recession…and during that time, if we look back at news articles posted around 2009 to 2011…the worry was runaway INFLATION.
Except, we look back, the HIGHEST inflation we ended up seeing was during 2011, as our economy started recovering…and that, at its peak…was 3%. Then, the years after that…were under 2%.
https://www.thebalance.com/u-s-inflation-rate-history-by-year-and-forecast-3306093
And because there’s not too much data that I can pull from such an event like what we’re seeing today, combined with the lack of previous stimulus packages…there’s not too much we can rely on. But, expecting events of such extreme hyper-inflation are pretty much not going to happen in the United States and North America.
For business or one-on-one real estate investing/real estate agent consulting inquiries, you can reach me at GrahamStephanBusiness@gmail.com
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