Is Inflation or Deflation in our future?

Question

Price of Houses is going down. Price of Stocks and Bonds is going down. Price of Food and Gas are up.

Answer 1

I think that the foreseeable future will consist mostly of inflation. Gas is certainly going to be rising, apparently food is on the way up too, although I haven't seen any drastic changes where I am in Canada.

Increased price of gas means increased cost of most businesses to operate, which means increased prices to cover the costs of manufacturing and shipping.

That combined with the weakening American dollar doesn't paint a very happy picture for you or us.

I can't see a full blown depression or anything coming, but prices will certainly continue to rise, at least slightly, if not considerably.

And, if I read up on this correctly, the Economic Stimulus Plan consist of spending billions of dollars that the American Government really doesn't have. And history shows that printing more money to replace your losses leads directly to rampant inflation 9 times out of 10.

Answer 2

We always have inflation, because the government spends always more then it gets through taxes. So they have to add to the money pool.

Inflation will be hoovering around 6 - 10% for the next 3 years, but government will issue a different number, they are good at that.

Answer 3

Inflation is already happening, we are almost in hyperinflation, once that happens the economy pretty much collapses unless it is able to sustain itself with its own natural resources.

Answer 4

The prices of assets like houses and stocks are not what determines inflation, which is defined as a general increase in the prices of goods and services.  The Consumer Price Index measures the increase in the "cost of living" using a standard basket of consumer goods and services. Other measures of inflation can give somewhat different results, but in general US prices are rising between 2-4% a year right now. A bunch of this is a direct result of rising energy prices.

Deflation, a general fall in prices of goods and services, is rare in the modern world (except for a recent decade in Japan) and last occurred in the US during the Great Depression of the 1930s. Unlikely to happen again.

Asset prices, like stocks, respond to the future earning power of the underlying asset, and since the economy is weak and corporate profits are falling, stocks are falling too.  Home prices are sick as a direct result of a previous "bubble" in housing prices, fed by foolish lending and borrowing. Both stocks and houses will hit bottom at some point. But overall inflation in the US will continue. In other countries, inflation is worse (check Vietnam and China) than in the US.