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Tom Meaglia, ChFC®
Chartered Financial Consultant
AEP®, CLU®, MSFS
Investment Advisor Representative
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Meaglia Financial Consulting
2105 Foothill Blvd., #B140, La Verne, CA 91750
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The trillions of dollars spent by the government in 2020 to help offset the impacts of the coronavirus pandemic, has raised speculation as to how it will impact the U.S. economy in the short- and long-term. Economists often mention terms such as inflation, deflation, and hyper-inflation. We’ll explain what these terms mean.
With the multi-trillion-dollar stimulus packages pumping money into the economy, this new infusion of cash could lead to an increase in demand. Typically, excess money means more people are going to spend. Inflation can be slowed or avoided if the excess money is saved and not spent.
Inflation isn’t entirely bad unless it happens quickly creating hyper-inflation.
Hyper-inflation usually results when a government incurs financial or political stress. Wars and declining tax revenue are some of the culprits. Zimbabwe incurred hyper-inflation in the early 2000s when the government printed more and more money in an attempt to finance a war with Congo and meet the demands of high unemployment which decreased tax revenue and consumer demand.
While the U.S. economy remains healthy, understanding these basic economic principles can help you to better understand what economists are saying.
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