Inflation is often portrayed as a problem for the economy and the share market. With interest rates at record lows, and central banks printing money like never before, investors are concerned about inflation heading higher. However, a low level of inflation is healthy for the economy. In this article we discuss what the causes of inflation are and how it is good or bad for the economy. What does inflation mean? The simple definition of inflation is the general rising …
High inflation has often been considered harmful to the economy. However, it is deflation which can be more harmful to the economy. Economist John Meynard Keynes believed that some inflation was needed to encourage consumers to spend and prevent the paradox of thrift. The paradox of thrift is detrimental to the economy. This is because savings prevents consumers from spending and the economy from growing. Deflation can be a bad for the economy Deflation occurs when all prices fall. Simultaneous …
Inflation is the rising price of goods and services. The increased cost of living essentially means you will need to spend more money when purchasing everyday items such as bread, milk, apples, petrol etc. Generally speaking cash would be the worst asset class to hold in a high inflationary environment. However stocks would be a better choice. This is because a company’s revenue and earnings should grow at the same time as inflation. Companies usually pass rising costs to the …
The Macro stuff: Can’t escape what happened in the AUD over the weekend – despite a weak USD to finish last week’s trading week – AUD lost ground, and from where I am sitting it’s all to do with the Statement of Monetary Policy (SoMP). The suggestion from the release is pretty clear – RBA will be unable to reach its longer-term objectives inside the next 26 months and the conclusion – clouded outlook, an AUD that is clearly above …
Read MoreMacro-Micro: SoMPing the AUD – anyone for retail therapy?
Huge week of Macro and Micro data – three central banks, PMIs from all point of the world, GDP prelims, manufacturing data construction data etc. etc. etc. However, need to point out that Australia actually has the data to watch both from a Macro perspective and a Micro one this week. Macro Stuff: Tuesday – RBA Meeting Although the majority of the country will be tuned into an event at 3pm AEDT (for what it’s worth – money is on …