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Should You Prepare For Rising Or Falling Prices?

Apr 28, 2008
Proper business planning is essential in any business. Some companies are better than others of course; for instance, Toyota's planning is superior to the U.S. automaker's planning. Toyota used innovative technology and began to introduce high mileage hybrids when the cost of gasoline began to rapidly rise. This type of proper business planning will lead to greater success.

Personal planning is similar to business planning. A successful life can be experienced with proper personal planning. Planning the budget, future expenditures, and proper investments are important part of successful planning.

The U.S. happens to be engaging in a hyperinflationary path today. What this means is the Federal Reserve is loaning billions of dollars to ailing banks. This causes many economical problems such as inflation. Many believe inflation to be the rise of prices; actually it is a devaluation of money due to dilution. When Ben Bernanke gave his infamous helicopter speech it was stated that the Federal Reserve can dilute the value of a country's money when they feel the need.

Currently we are on a hyperinflationary path but need we continue this path to the bitter end? In the early 1920's Weimar Germany followed this path until their currency, the Mark, was completely worthless. In 1914 the Mark's worth was about 4.2 Marks to equal one US dollar. It began falling and in 1920 it took nearly 39.5 Marks to equal one US dollar. The falling trend continued until November 1923 it took 2.4 trillion Marks to equal one US dollar.

By December of 1923 the Mark was completely worthless and was replaced. This is a prime example of a country's currency that experienced hyperinflation to the point of worthlessness. The big question regarding hyperinflation is if it is necessary to add to the continuation of prices until it reaches infinity? No. In the late 1970's the U.S was on an inflationary path. This could have continued with more and more currency being created; however, the attention was drawn to the rapidly raising costs. Paul Volcker, changed the path from a hyperinflationary one that the country was on.

Unfortunately we seem to have found our way to this path again 28 years later. Will we be able to stop the momentum in time or will like Weimer Germany in the 1920's? Can we stop it and if so when and how?

Those are very good questions. Today we read about riots in Haiti over food prices that were rapidly rising. People have been killed over this already. Raising prices affect the public differently at times and sometimes hyperinflations are stopped; sometimes however, they are not.

All ships will rise with the rising tide. It is nearly impossible for home prices to rise with the prices of food, gasoline, clothes and everything else falling. My best guess right now is that the hyperinflation will continue for now and when the prices of homes begin to raise again the public will see it as a good thing.

The problems associated with hyperinflation such as riots will generally signal the end of the hyperinflation is near.
About the Author
J Stromsteen has many years experience in the finance and insurance industry. She writes for the website Bush's Depression as well as first time home buyer to provide up to date information on the unfolding real estate crisis.
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