Inflation Can Help And Hurt
Inflation is often portrayed in the media as a bad thing, however, it is a necessary ingredient for our lives to operate in a smooth manor. While none of us likes paying more for products, inflation, in and of its self is not necessarily a bad thing. For example, stock market beginners need to know in real estate inflation allows our home value to increase while the payment remains fixed.
The following example shows how inflation can actually be helpful.
Bob and Marie bought their first home in 1989 for fifty four thousand dollars. The home payment, which includes the insurance premium and the taxes, were four hundred dollars each month.
In 2006, the home was appraised at two hundred ten thousand dollars. Due to increases in taxes and insurance the payment for the home had increased to five hundred ten dollars.
Bob and Marie have benefited greatly from inflation. There investment has grown by a five hundred percent factor. At the same time, they are paying the same amount of money for the home in 2006 that they were 17 years ago.
Recently, Rob and Mary had their home reappraised. Due to the economic conditions in the United State of late the home is now only worth one hundred fifteen thousand dollars. Their house payment remains exactly the same as it was in 2006, but the home has lost almost half of its value form 2006. The lack of inflation has caused Rob and Mary to lose net worth. Unless the economy turns around and we begin to have some inflation once again, their property will continue to lose value.
While none of us want to have runaway inflation which often is very harmful to those on fixed incomes, we all depend on some amount of inflation to keep our economy running smoothly.
What we really desire is to see balanced inflation. The prices of things grow gradually along with our paycheck as well as the value of our property. - 23162
The following example shows how inflation can actually be helpful.
Bob and Marie bought their first home in 1989 for fifty four thousand dollars. The home payment, which includes the insurance premium and the taxes, were four hundred dollars each month.
In 2006, the home was appraised at two hundred ten thousand dollars. Due to increases in taxes and insurance the payment for the home had increased to five hundred ten dollars.
Bob and Marie have benefited greatly from inflation. There investment has grown by a five hundred percent factor. At the same time, they are paying the same amount of money for the home in 2006 that they were 17 years ago.
Recently, Rob and Mary had their home reappraised. Due to the economic conditions in the United State of late the home is now only worth one hundred fifteen thousand dollars. Their house payment remains exactly the same as it was in 2006, but the home has lost almost half of its value form 2006. The lack of inflation has caused Rob and Mary to lose net worth. Unless the economy turns around and we begin to have some inflation once again, their property will continue to lose value.
While none of us want to have runaway inflation which often is very harmful to those on fixed incomes, we all depend on some amount of inflation to keep our economy running smoothly.
What we really desire is to see balanced inflation. The prices of things grow gradually along with our paycheck as well as the value of our property. - 23162
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posted by X - Men @ 7:00 AM
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