Looming Inflation
Over the last several years, the threat of inflation hasn’t really been an issue due to our low consumer price index. In fact, you may recall a brief timeframe when there was even talk of deflation. However, we may start to see inflation start to become a real threat throughout 2011 & 2012.
This threat of inflation comes from several factors that have been building over the last several years. However, the most detrimental factor may be due to the fact that the Federal Reserve has been trying to keep interest rates low. Although the low interest rates may have been what have kept our housing market from sinking even lower than it has in the last two years, it may ultimately lead us to a period of inflation if the Fed doesn’t start raising interest rates at least on a gradual increment.
In addition to these low interest rates, the cost of both raw good and finished products was trending up at the end of 2010. In order for companies to maintain a profit, the increased costs of these goods will eventually trickle down into the consumer purchase price. A trend we have already begun to see in the early months of 2011. And with oil prices reaching record number on a weekly basis, it is almost certain that the costs of these goods are going to increase accordingly as the cost to transport goods will be directly effected by higher fuel costs. Although the U.S. does lead the way in oil consumption, most of the recent increase in oil demand comes from developing nations and is outside our nation’s control.
Oil isn’t the only global trend that may ultimately bring about a period of higher than average inflation. In addition to an increasing world population, as more and more developing nations advance both in an industrial and cultural aspect, so does their demand for a wider array of food products. This increased food demand translates into higher food costs on a global scale.
Finally; as announce in 2010, the Federal Reserve will be flooding the market with new money as it will be buying up around $600 billion worth of Treasury Bonds. This additional $600 billion in our economy will likely have a negative impact on our dollar when compared to its international exchange rate. This will mean higher prices when U.S. companies import good from other countries. Again, this increase in expenses will eventually trickle down to consumer prices.
Although inflation in inevitable, it may easily get out of hand if left unchecked by the powers that be.
Should you have any questions or need further information,
please don’t hesitate to contact me, (775) 220-1630
Or visit my website: www.SellingHomesinReno.com
Joshua Talayka
NAR designated: Short Sale & Foreclosure Resource
Chase International
Office: 775 850 5900
Toll Free: 877 922 5900
Cell: 775 220 1630
Fax: 775 850 5901
985 Damonte Ranch Pkwy, Ste. 110
Reno, Nevada (NV) 89521
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