Need a little help understanding inflation and deflation?
Grand Rapids, MI -- (SBWIRE) -- 03/13/2013 -- Financial advisor Dennis Tubbergen can be counted on to give the latest U.S. and world happenings when it comes to the economy and general financial news. However, Tubbergen has spent a lot of time helping people understand what deflation is and how it could potentially impact the average person in the U.S.
Tubbergen, who is a financial advisor, author, radio show host and CEO of PLP Advisors, LLC pens a weekly newsletter at www.moving-markets.com and writes a blog that can be viewed at www.dennistubbergen.com. On March 5, his blog was titled More Proof That Debt is Deflationary.
"Many of the world's central banks are money printing in an effort to stop deflation," began Tubbergen. "As I've discussed, inflation is defined as an increase in the money supply while deflation is defined as a decrease in the money supply."
Tubbergen goes on to say that when debt levels reach excessive levels, defaults cause money to leave the system via defaults. Central banks then attempt to neutralize this deflation by adding money to the system through quantitative easing.
"The country of Japan has been trying to neutralize deflation for a long time," explained Tubbergen. "The recently elected Japanese Prime Minister vowed, upon election, to print enough money to achieve an annual inflation target of 2 percent. According to an article published in Business Insider, he is failing miserably."
Tubbergen quotes below from the February 28, 2013 article.
Japan just released consumer prices data for the month of January.
CPI fell 0.3 percent year over year, more than economists' expectations of a 0.2 percent decline.
Moreover, the pace of deflation accelerated from December, when prices fell 0.1 percent year over year.
The Japanese government has been spurring a devaluation of the yen in recent months in a bid to end deflation, which has gripped the Japanese economy for a decade.
While the pass-through from yen devaluation to consumer prices is not an immediate thing, trying to reflate prices from these lower price levels does not help the government in its quest to achieve rising prices.
"To quote John Mauldin, Japan is a bug in search of a windshield," emphasizes Tubbergen. "In spite of the efforts of the Japanese Central Bank, deflation continues to grip the country of Japan. When debt levels reach the capacity of the system to handle debt, deflation is unavoidable."
According to Tubbergen, Japan cannot avoid deflation; it can only try to deal with it.
"Continuing to print money to try to make deflation go away won't work," concludes Tubbergen. "As we are taught by history, it will only make the eventual deflationary problem worse."
To read the blog in its entirety go to http://www.dennistubbergen.com and select his March 5, 2013 entry.
Tubbergen’s syndicated radio show can be heard on metro Michigan stations WTKG 1230 AM and WOOD Newsradio1300 AM and 106.9 FM. To listen to his shows as podcasts go to www.everythingfinancialradio.com
About Dennis Tubbergen
Dennis Tubbergen has been in the financial industry for over 25 years and has his corporate offices in Grand Rapids, Michigan. Tubbergen is CEO of PLP Advisors, LLC and has an online blog that can be read at www.dennistubbergen.com. To view Tubbergen’s latest Moving Markets? newsletter, go to www.moving-markets.com.
The opinions expressed herein are those of the writer and not necessarily those of USA Wealth Management, LLC. This update may contain forward-looking statements, including, but not limited to, statements as to future events that involve various risks and uncertainties. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual events or results to differ materially from those that were forecasted. Therefore, no forecast should be construed as a guarantee. Prior to making any investment decision, individuals should consult a professional to determine the risks, costs, benefits and fees associated with a particular investment. Information obtained from third party resources is believed to be reliable but the accuracy cannot be guaranteed.