In business and the markets, there exists a power play between two opposing forces and the people behind them. Seldom seen in the open, it is the battle between inflation and deflation.
Inflation means rising prices for everything. Its backers are fully invested businesses, speculators, homeowners, and workers, as well as debt holders, who can pay back their borrowings with cheaper dollars.
On the side of deflation, or falling prices, are creditors who can re-possess bankrupt businesses and take control of assets. Businesses that haven’t invested all their capital can snap up assets on the cheap from distressed buyers, and savers can buy more with their money.
Real estate benefits from inflation and Donald Trump, as we all know, is a real estate mogul. Paul Brodsky of Macro Allocation Inc. says Trump’s background and training may influence future policies.
“There will be an overwhelming emphasis on nominal GDP growth through government spending. … As a real estate developer, he has always been ‘a nominal guy,’ not caring about real (inflation-adjusted) returns, only returns that ever more debt can bring,” Brodsky wrote in a note to clients.
In real estate, you can borrow at a fixed interest rate. The higher that prices and rents rise, the more money you make.
