"Value of money" question (real estate, buy, interest, financial)

[shihtzumom]

I have a question for a Financial Managment test I'm not sure about:

"What happens to the value of money if prices in general fall?"

THANKS

[Philip T]

Originally Posted by shihtzumom

I have a question for a Financial Managment test I'm not sure about:

"What happens to the value of money if prices in general fall?"

THANKS

Generally that is called deflation. Such as is happening in Real Estate. Severe recession is usually associated with Depressions.

The Powers that be are battling that now, at least in their own mind. That is why the Fed is throwing money into the banks without regard to the merit of the various banks, and why the Treasury (via the IRS) is sending out the please-go-something-stupid-with-this-money "stimulus" checks.

They figure throwing more cash into the mess might keep the boat from sinking.

[Sgoldie]

In answer to you question - Purchasing power increases.

What is happening in the current real estate market is a price correction. Prices were too high to sustain themselves due to speculation. The Fed was trying to give the banks a softer landing in an uncertain floor so as not to collapse the entire financial system and in doing so by weakening the dollar among other things have caused inflation in general living prices (food) and as investors have redirected speculation into petroleum. In this way we are all paying for those who wanted (and did) make a 50% return on their house in a few short months, and also their conspirators.

[StealthRabbit]

Originally Posted by shihtzumom

...

"What happens to the value of money if prices in general fall?"

...

The value of your money increases, because it buys more stuff

When prices rise (in general), the value of your money DECREASES, as it buys less stuff, especially next year if you have buried it under your pillow, as the prices keep rising and if your pillow is not paying interest you are losing value every day. So typically $1 this yr buys 2 oranges (@ $.69 / lb) a couple yrs ago it would buy 4 oranges @ $.30 / lb) the value of your money DECREASED as prices increased.

BUT ... next yr it will buy you 1 orange, even tho we don't call it inflation, just consider you will be paying a $.50 'energy surcharge' for that $.35 item

I won't get into the housing thing.... I'm more worried about eating, I can sleep under a bridge.

[Philip T]

Originally Posted by janb

I won't get into the housing thing.... I'm more worried about eating, I can sleep under a bridge.

Do you figure . . . that once the (now) public roads are sold off as toll roads . . . they will start charging rent to sleep under the bridges?



That might help cover a CEO bonus or stock option. The important stuff, yunno.

As far as hungry, I would recommend eating Capitalists. While some are sort of old and stringy, anymore they tend to be low fat and well fed.