In contrast to inflation, deflation is that rare economic condition when prices of goods and services fall due a lack of demand. The last time large scale deflation occurred was when the U.S. economy practically came to a halt during the Great Depression in the 1930s. There can be a domino effect from falling prices – factories shut down because of declining profits, more and more people are laid off, household incomes shrink, and companies and individuals default on their loans. In a more recent example, falling housing prices have put pressure on many homeowners--forcing them into distressed sales which creates even further downward pressure on property prices and other asset values.

The World is Very Long on Longevity Risk

Longevity risk is clearly a huge growth market.  One has to wonder, though, where the capacity to address this market opportunity will come from.


What happens if the The Dollar is abandoned and new currency issued?

An interesting question and a rather extreme scenario I suppose.

As you indicate, the currency can suffer quite a bit of damage through either inflation or deflation.

I am not sure, however, how the contractual obligations would be affected in an insurance or annuity contract if the currency were replaced. 

Key Phrases: 

Annuities and Deflation

There seems to be quite a bit of concern about inflation, and lots of discussion about how inflation impacts annuities and other financial services products.

I do not see as much discussion of deflation.

I believe that there is a real possibility of continued and prolonged deflation.

How are annuities impacted by deflation?


The Dangers of Buying an Annuity When Interest Rates are Low

Interest rates are the raw material used in manufacturing annuities.  Rates are currently very low--the 10 year treasury note is hovering around 3.4 percent and 30...