Inflation and Deflation Explained
Useful goods and services don’t change; it’s the value we place on them that changes. In this video, I explain the complicated concept of inflation and deflation using my iPad as a visual aide.
When it comes to real estate investing, you have to understand a basic concept. If there are a number of individuals or buyers with dollars in their hands chasing the house, we say that the price of the house goes up. If the opposite happens – when fewer dollars are chasing the house – we say the price of the house has decreased in value. (Remember the housing “bubble”?)
There’s a lot more to it than that, but this will help you understand the concept. There’s more to learn!
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Jay Massey here, with the CashFlowDiary.com and in this video we’re going to hopefully demystify for you some concepts around inflation as well as deflation in two minutes or less.
So when it comes to inflation and deflation do you just even understand what it is?
I’m going to do my best to give you a simple understanding. Let’s pretend for example that what we have are things that we consider to be useful goods and/or services but occasionally an asset. Sake takes this particular item for example. If we suddenly have this is the last one available and you absolutely need it but we print a whole lot of more money we haven't increased the number of units that have been produced but we have increased as measured in dollars or currency the value of this particular item.
But because it doesn't produce any additional utility value it doesn't necessarily mean that it's more useful. However as measured in dollars the price goes up and that's what we call inflation.
So think of it this way.
If this was a house we had a house we got one little house right here and we suddenly have a whole bunch of dollars chasing after this house trying to get it. This house is measured in dollars increases in value. Therefore we experienced inflation or we say the price of the house went up.
Well if we have fewer dollars chasing the same asset we have the exact opposite occurring also known as deflation. At the end of the day, they're just inversely proportional to one another.
More dollars chasing the same number of assets or fewer dollars chasing the same number of assets results in either pricing increasing or decreasing i.e. your money buys less in one case and your money buys more and stretches further.
Thanks for watching.
To begin to protect yourself against the evils of inflation and to get started in real estate investing today here's what I want you to do. Click the link right here. It's going to take you to a page where I'm going to teach you the most 10 basic words that you can use right now to begin to build your businesses by finding all of the buyers, sellers, as well as investors you need in your marketplace.
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Until next time.
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