The word “inflation” is now known as fear for most of the people. It really invokes worries in hearts due to the rise in prices, bad economic conditions and fall in value of dollar. The cost of living is considered as much high as compared to the income due to inflation. High inflation is hurting financially most of the people. However, some people also gains benefit from the inflation. Some description about probable winners and losers due to inflationary cycle is going to be discussed here.

Winners in inflationary cycle

Winners gain remarkable benefit from the inflation. These are described here in detail.

1. Fixed-rate holders – Winners mostly includes in the holders of fixed-rate mortgage. It is considered that anyone holds large and fixed-rate debts like mortgages may gains benefit from high inflation rates.

2. Selection of best mortgage rates – Selection of lowest mortgage rate can be helpful in falling value of dollar. Homeowners can also gain benefit from the higher inflation when buying during the peak detonation.

3. Holders of auto-loan – Holders of auto-loan, who bought during the lower inflation, faced rather lower interest rates. These auto-loan holders gain benefit in high inflation and pay a lower debt with decreasing value of dollar.

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Deflation is actually the decrease in the rate of rapidly increasing prices of the common commodities. After the inflation produced in USA in 1970s and 1980s, it has seldom occurred the prices came to the normalcy state.  And now all over the world, due the worse economic situation, and economic crisis, inflation can’t be expected to lessen down.

Inflation is because of the economic problems. It also includes political changes and instability. Common commodities like daily use products and basic food items prices are going up day by day. Citizens of such country are not able to satisfy their utility needs. This creates frustration among the nation and also develops a criminal position in the state. Government should take serious steps to control inflation and to create deflation in the country.

Deflation-a crude explanation

• In simple terms, it is a decline in process and isolated deflation occurs almost all the time.
• It is also a prolonged and steeped decline in prices, like customers’ paradise at its start. But a lot of worrisome issues are accompanied with its pro long occurrence. Like the corporations get shrink profits, workers might be pressured into wage cuts or layoffs, and as the people delay the spending due to lower prices, the economic activity gets badly disturbed. Currently, there is every reason to believe that the U.S. economy can stave off deflation should the recovery gain steam. Read the full story

Interest rates are expected to remain as low as of 0.5% throughout 2010 to support UK recovery, experts stated.

Markets expected a rate increase in the third quarter of 2010 with borrowing costs of 1.5% or more by the end of the year. According to the forecast done by banks, this will result in the inflation of 2 % target.

This indicates that the borrowing costs will remain low for a longer period of time or the Bank could make efforts to increase the money supply with the help of its quantitative easing program, which presently stands at £200 billion.

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According to experts, it is possible that the interest rates will stay at record lows of 0.5% throughout the next year to support the recovery process in UK .

A rate hike was expected in the markets by the third quarter of 2010, with borrowing costs reaching 1.5% or greater by the end of the year. However, the banks forecast that inflation will undershoot the 2% target if this happens.

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Across the country,national legislators are being pushed by student governments to pass a bill that should be designed such as to help students attend higher education and cover college expenses.

Student Aid and Fiscal Responsibility Act (SAFRA)

On Sept. 17, Student Aid and Fiscal Responsibility Act (SAFRA) has been passed by the U.S. House of Representatives by a vote of 253 to 171. O Oct. 15 the act will be voted on in the Senate.

If the bill is passed, SAFRA the federal financial aid system will be rebuild by providing more money to the U.S. Department of Education and so the government will get rid of loans that they buy from banks. SAFRA also expands programs in order to support college enrollment and also to increase graduation rates.

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This week, the mortgage rates for 30-year fixed loans fell to the lowest level since May. This has led to reduced borrowing costs for hesitant buyers. Recent signs show that the recession in the U.S. housing market may be bottoming.

According to Freddie Mac of McLean, Virginia, the average 30-year rate fell to 5.12 percent from 5.29 percent. The 15-year rate was 4.56 percent.

The fall in home prices and a government tax credit for first- time buyers is reinforcing the tepid demand. According to the Washington-based MBA, the Mortgage Bankers Association’s index of applications to purchase a home or refinance a loan rose 5.6 percent to 527.

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According to the Bank of England Report published yesterday, Low interest rates could be with us for some time.

The Centre for Economics and Business Research (Cebr) said that the reality of a deep recession and slow recovery has dawned upon the MPC, recognizing that dull growth and downward pressure on prices may be of the greater concern.

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This week in the US mortgage rates fell. Easing concern the Federal Reserve decision to lower down the mortgage rates by purchasing mortgage-backed securities was losing momentum.

It was said by mortgage buyer Freddie Mac of McLean, Virginia, in a statement that the average 30-year rate dropped to 5.32% which was 5.42%.While the 15-year rate was at 4.77 %.

Efforts are being made by Federal Reserve Chairman Ben S. Bernanke to lower down the borrowing costs. He has got a $1.25 trillion program to purchase securities backed by home loans.

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Minds of most Americans have been corrupted with many economic myths by mainstream economists and so called experts, which are reinforced by the media and often repeated on the streets. These myths are false in most cases, and based on half truths in others. We constantly hear things like: inflation is caused by rising oil prices; consumption is the most important element for economic growth; government expenditures help stimulate the economy; and many others.

In this article, First in a series of two, I will explore some popular myths regarding Inflation and Energy matters. In the second article, I will write for you about common myths about Consumption.

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