Monday, March 3, 2014

Inflation and Deflation cycles

The long bull market that began in the 1980's was followed by two bouts of financial deflation, in 2000-2002 and 2007-2009, as stocks declined by more than 40 percent for only the fourth and fifth times since 1900. 

A financial inflation/deflation cycle has also occurred among financial institutions that greatly leveraged their balance sheets over the past three decades and are now being forced to raise capital, while reducing risk and leverage.