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Typically, deflation is a sign of a weakening economy. Economists fear deflation because falling prices lead to lower consumer spending, which is a major component of economic growth. Companies respond to falling prices by slowing down their production, which leads to layoffs and salary reductions.
8 Ways To Invest In Foreclosures And Earn Money
Buy and Hold. This is the strategy of a person who buys a foreclosed property and holds on to it until its market value appreciates.
1. Rentals (with positive cashflow!) …
6. Tax Foreclosures.
they have lost money if a loan is not paid. The money is destroyed in a default, or even if the loan is paid back. The mortgage calculator difference when a borrower defaults is that the bank’s profits have declined by the amount of the loss, text to speech which eventually shows up in the balance sheet as a capital loss. They do care about being paid back. A capital loss is a serious thing.
Banks’ loans aren’t limited by their deposits but they are limited by their capital, both by regulation and prudence.
Now you see why banking is such a good business; they print money!
Who Benefits And Who Suffers From Inflation And Hyperinflation?
The beneficiaries of high inflation include any individual or entity who has borrowed money at a fixed rate. High inflation also benefits investors who own commodities, and businesses that derive a significant portion of revenue from exports. Who loses with inflation? First, the overall economy suffers. Specifically, consumers lose purchasing power and their standard of living erodes. Lenders are also hurt as are those who need to borrow. The latter group suffers because lenders raise their interest rates to hedge against inflation. In short, money becomes much more expensive. Finally, import-oriented businesses struggle when inflation is high.
Hyperinflation, on the other hand, hurts almost everyone. It decimates the middle class. It can cause massive bank failures, especially banks with large amounts of outstanding fixed-rate loans. And, although borrowers who have a fixed rate loan do benefit, because prices on everything else are increasing so rapidly, any benefit from the loans is erased by the extreme cost of goods and services. There really are no winners with hyperinflation.