Survive The Economic Crisis In A Period Of Deflation
Deflation happens to be the new potential boogeyman for every consumer. The prolonged period of experiencing downward spiraling prices of services and goods can be a possible threat to any economy.
Certainly, lower prices of goods and products might seem to be appealing. It can make the cost of living cheaper. From vacations to food and cars, people can enjoy everything at a lower rate. But intervening deep into the matter, one can see that the prices decline due to the lasting drop in demand and this is how deflation happens. It indicates lower wage conditions for the employees and a slow spending rate for the consumers. This combination can drag down the economy for years.
Battle Deflation With These Tips
It is easier to tame inflation rather than get derailed by deflation. These tips can help any investors or consumers to survive the crisis during the period of deflation.
· Reduce The Debt
Focusing on paying off debts can be one of the best ways to prepare for deflation. During widespread price decline, it can be difficult to pay off any loans, mortgages, or credit cards. Hence a good return on investment would be to pay whatever debt you have.
· Choose High-Quality Bonds
High-quality bonds can offer a safety factor. During such a period, it is very common to experience bankruptcy. Therefore buying high-quality bonds can help to ease the tougher economic condition.
· Don’t Load Up The Stocks
The stock market performs poorly during the How Deflation Happen (สาเหตุ เงินฝืด, which is the term in Thai) period. Companies are often under pressure due to falling prices. Hence they cannot keep up with the profit margins or revenues. Though it is the best time to invest in stocks. But one needs to know the limit of investment.
· Keep Your Eyes Open
There are some stocks and sectors that offer protection during deflation. Companies having an international presence with strong brands can be the safest bet at such a time. These companies are in the best position to withstand the extended slowdown of economic growth.
Taking the example of Japan, investors need to avoid beverage and food makers, mining companies, and household product manufacturers. It is time to pay attention to the technology and healthcare sectors.
Risk Can Be Profitable At Times
Deflation can be difficult for a lot of people. The whole economy also endured a lot during such a period. Especially debt and unemployment can be risky. It can also pose immediate problems, especially for the economy. People must calm down in such situations as the risk can be profitable at certain periods.
