Make us your home page

Is deflation on the horizon? Here are some tips … just in case

If Harry S. Dent is right, we may be headed into something not seen since the Great Depression: a prolonged period of deflation.

Deflation, an economic funk marked by falling prices and falling wages, is particularly vexing because it could feed on itself. Consumers see prices falling so they hold off on making purchases, betting that prices will be even cheaper down the road. Less demand slows production, leading to more layoffs and less consumer spending. And so on.

"This next decade is one of those unique times in human history when we can unlearn the very principles that have brought us such great and unprecedented success," Tampa investment adviser Dent writes in his upcoming book, The Great Crash Ahead.

It's hard not only for those trying to make a living, but for anyone trying to find safe havens to save for the future.

Dent and his co-author, Rodney Johnson, offer some survival tips ahead of their predicted economic winter:

• Don't chase short-term investment gains. Preserving capital is more important in a climate like this than trying to make a quick buck. Many investments can turn sour quickly.

• Don't bank on a pickup in the stock market or real estate. Rather, consider the U.S. dollar as a safe place to park your money before the deflation cycle takes hold.

• Develop high-quality, steady streams of income once deflation sets in. "If you have streams of income, you have the ability to keep your income at a certain level as prices go down so you're in a better spot," Johnson said.

One option: buying U.S. Treasurys. Eventually. Dent and Johnson predict U.S. Treasurys will go up in yield in the next three or four months as people worry about the U.S. debt, and then they'll make more sense as an investment.

• Pay down debt sooner rather than later. If there's a short-term period of inflation, as Dent forecasts, the dollar will go further to pay down credit card balances, student loans and mortgage debt.

• Consider renting instead of buying if you plan to stay in a house for only a few years.

• Don't give up your day job without some promising alternatives. With wages stagnant or falling, it may be tempting to walk away, but consider that you're not the only one suffering through the wage cycle.

Is deflation on the horizon? Here are some tips … just in case 08/26/11 [Last modified: Friday, August 26, 2011 8:08pm]
Photo reprints | Article reprints

© 2017 Tampa Bay Times


Join the discussion: Click to view comments, add yours

  1. New owners take over downtown St. Petersburg's Hofbräuhaus


    ST. PETERSBURG — The downtown German beer-hall Hofbräuhaus St. Petersburg has been bought by a partnership led by former Checkers Drive-In Restaurants president Keith Sirois.

    The Hofbrauhaus, St. Petersburg, located in the former historic Tramor Cafeteria, St. Petersburg, is under new ownership.

  2. Boho Hunter will target fashions in Hyde Park


    Boho Hunter, a boutique based in Miami's Wynwood District, will expand into Tampa with its very first franchise.

    Palma Canaria bags will be among the featured items at Boho Hunter when it opens in October. Photo courtesy of Boho Hunter.
  3. Gallery now bringing useful art to Hyde Park customers


    HYDE PARK — In 1998, Mike and Sue Shapiro opened a gallery in St. Petersburg along Central Ave., with a majority of the space dedicated to Sue's clay studio.

     As Sue Shapiro continued to work on her pottery in St. Petersburg, her retail space grew and her studio shrunk. Now Shapiro's is bringing wares like these to Hyde Park Village. Photo courtesy of Shapiro's.
  4. Appointments at Raymond James Bank and Saint Leo University highlight this week's Tampa Bay business Movers & Shakers



    Raymond James Bank has hired Grace Jackson to serve as executive vice president and chief operating officer. Jackson will oversee all of Raymond James Bank's operational business elements, risk management and strategic planning functions. Kackson joins Raymond James Bank after senior …

    Raymond James Bank has hired Grace Jackson to serve as executive vice president and chief operating officer. [Company handout]
  5. Cooking passion spurs owner to pull open AJ's Kitchen Drawer


    TAMPA — After graduating from the University of Tampa in May 2016, AJ Albrecht spent four months traveling around Southeast Asia and Australia.

    AJs Kitchen Drawer offers a wide variety of unique kitchenware items, such as handcrafted knives and wooden items, as well as local gourmet products. Photo by Danielle Hauser