The Herald Bulletin

Morning Update

Columns

March 7, 2014

'Big Joe' Clark: Time to reconsider your hatred for inflation?

(Continued)

If the value of the house falls — think 2008 — then the asset is worthless as collateral. The value falling is considered deflationary. The Federal Reserve put on a full court economic press, adding over $3 trillion to its balance sheet and our economy, all in the name of keeping asset prices higher and avoiding deflation. Yes, they want job growth too, but they needed asset prices to move higher. They needed to create inflation and they did.

Inflation is fickle. The Fed acknowledges that its actions can lead to bubbles (irrational asset prices that have to decline eventually), but also note that it can’t completely control where the money goes. Is the bubble in U.S. Treasuries? Is it in farmland or in the stock market? Worse yet, is it in grocery prices? One secret characteristic of a bubble is you aren’t aware it’s a bubble when you are participating in the excitement.

Conversely, you can’t comprehend how distorted prices can become before a crash. Sudden surprises in things like weather can amplify inflation. Rising food costs are part of the economic cycle and the rising population growth.

Unfortunately we must take the good with the bad in order to see appreciation in our portfolios and house values.

Joseph “Big Joe” Clark, whose column is published Saturdays, is a certified financial planner. He can be reached at bigjoe@yourlifeafterwork.com or 640-1524.

Text Only
Columns
Featured Ads
More Resources from The Herald Bulletin
AP Video
Furry Roommates: Dorms Allowing Cats and Dogs Chase Rice Defends Bro-Country 'Jersey Shore Massacre' Pokes Fun at MTV Series Raw: Wash. Mudslides Close Roads, Trap Motorists DC's Godfather of Go-Go Honored Ukraine Calls Russian Convoy a 'direct Invasion' Girl Meets Her 'one in the World' Match Coal Gas Boom in China Holds Climate Risks Japan Landslide Rescuers Struggle in Heavy Rain Raw: Severe Floods, Fire Wrecks Indiana Homes Endangered Red Wolves Face Uncertain Future Raw: Russian Aid Convoy Arrives in Ukraine Okla. Policeman Accused of Sex Assaults on Duty Dominican Republic Bans Miley Cyrus Concert Raw: Israeli Air Strike in Gaza Raw: Bodies of MH17 Victims Arrive in Malaysia Attorney: Utah Eatery Had Other Chemical Burn
Parade
Magazine

Click HERE to read all your Parade favorites including Hollywood Wire, Celebrity interviews and photo galleries, Food recipes and cooking tips, Games and lots more.
Hyperlocal Search
Premier Guide
Find a business

Walking Fingers
Maps, Menus, Store hours, Coupons, and more...
Premier Guide
Helium debate
Helium
Front page
Poll

Do you think heroin is a significant problem in Madison County?

Yes, it has surpassed meth as the problem drug
Yes, but meth is still a bigger problem
No, this was an isolated case
Not sure
     View Results