Blog Why Not?!

In- and De-flation
What to do when it hits the fan
Economics, 081026

So far I have not personally been affected by the crisis. It has just been something that I have read about in the news, so to speak. This will certainly change. But for some reason, it seems as though people around me are unaware of the financial crisis and its implications. Since I am aware of my situation I have spent a lot of time learning about economics and stuff.

From what I gather, there is a now an unavoidable recession in progress and nobody really knows what will happen next. Accordingly to some, there is risk for inflation and then there is as for an example Roubini who argues that there is a severe risk for deflation. So what am one to do in these times? Well, study, read and learn about the potential risks. Now is certainly a good time for making plans on how to act, depending on what happens next.

Deflation: From what I have learned one should prepare for a deflation by getting out of dept. Pay of your loans! Cache will be king. Keeping your job is the most important thing you can do! Risky assets and stocks should be avoided. Then there is the strategy that Warren Buffet follow, which is to buy stocks in solid companies that have a real long-term values when its stock is undervalued, since eventually (if the company does not go bankrupt) you will get your money back and then some. I have read that utilities and monopolists then might be a good choice during deflation. Then again, there are never any certainties.

Inflation: Even though gold does not seem to be a full proof hedge against inflation, several experts argues that during a hyperinflation gold perform well. Holding onto cache is not a good idea, so what you should do is to get involved and learn about equities. I have also read that one should avoid bonds.

Now I will keep myself updated on how things develop. Keep reading Roubinis blog or something: http://www.rgemonitor.com/blog/roubini

- Aramis

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