## Deflation Has Arrived: 3 Ways to Protect Your Money

According to economic news, GDP has contracted for two consecutive quarters, signaling the onset of **deflation** (Deflation)—a situation where prices of goods and services continuously decline. Your money might seem more valuable, but in reality, the opposite is true—if you do nothing, you will lose.

### **Who is the Enemy of Deflation?**

**Deflation** occurs when demand decreases, people spend less, businesses lower prices, reduce production, cut jobs, and incomes fall further, creating a vicious cycle.

Such a scenario has happened before, like the "Great Depression" in 1929 in the United States, which caused global GDP to shrink by 15%, unemployment to soar to 23%, and agricultural prices to drop over 60%. It took until World War II for the economy to recover.

Thailand nearly experienced this during COVID-19, with deflation at -2.99% (YoY)—the most severe in 10 years and 9 months.

### **Who Benefits and Who Loses?**

In a **deflationary** environment:
- **Advantages**: Fixed-income earners, creditors, cash holders
- **Disadvantages**: Banks, shareholders, debtors, merchants

Why? Because debt values increase while the value of money decreases.

### **How Does the Government Respond?**

When **deflation** occurs, governments typically:
- Lower interest rates (Bank of Thailand may reduce rates to 0%)
- Increase liquidity by (central banks purchasing debt securities)
- Cut taxes to encourage spending
- Run budget deficits to support businesses and employment

### **Investing During Deflation — Which Assets Are Still Good?**

#### **Debt Instruments — Choose Wisely**

When central banks cut interest rates, the value of existing bonds and debt securities increases. Opt for highly credible securities (The more credible, the better during this period)

#### **Equities — Focus on Essential Companies**

Most stocks decline, but companies selling essential goods like (food, beverages, and household medicines) still have high demand. You can research and consider investing in them.

#### **Real Estate — Bargain Prices**

When people hoard cash, property owners are forced to sell at lower prices. This signals a buying opportunity, ideal for those with extra funds.

#### **Gold — Self-Insurance**

During **deflation**, gold prices often fall, making it a good risk diversification tool. Gold has intrinsic value; investing now can be worthwhile.

### **Strategies to Protect Your Money**

**Method 1: Keep some cash on hand**

When money supply decreases and interest rates are high, customers prefer to hold cash rather than spend. Cash gains value during this period, making it worthwhile to keep.

**Method 2: Buy Put Options or Short Sell**

If you believe the market will continue to decline, you can use these tools to "speculate on downturns" without holding actual stocks.

**Method 3: Invest in CFDs on Various Assets**

Instead of buying physical gold, you can trade gold CFDs or other assets. Platforms like Mitrade allow starting with just 50 USD, enabling retail investors to profit from both rising and falling markets simultaneously without large capital outlay.

### **Summary — Why Should You Care?**

If the economy contracts, **deflation** will follow. Many people will face unemployment, businesses will incur losses, and the economy will be affected. But for those who understand and prepare, it presents opportunities.

Your money shouldn't sit idle in a savings account. Make it work—diversify, manage risks, and always research before making decisions.

Deflation isn't the end of the world; it's a test of whether you're ready to be a smart investor.