It’s been a crazy week this week! I have a quick comfort zone story for you and then I’ll dive right into some great questions I’ve gotten via email or on the blog– I appreciate all of your questions and will answer as many as I can each Friday!

Getting Out of My Comfort Zone…YIKES

But first my quick comfort zone story… so I spent Wednesday night this week WAY out of my comfort zone “Dialing for Dollars” at my girls’ school.

Yep, that means cold-calling ALL of the parents in my daughter’s class and asking them to donate $2450 to the school (on top of the tuition they already pay– it’s a private school). My knees were knocking when I made that first call!

It was not an easy job by any means (who likes asking people for money over the phone?) and even though it is for a great cause, our kids’ education, I was way out of my comfort zone!

But hey, here at Kung Fu Finance we practice what we preach so I sucked it up and started dialing, even though I was incredibly nervous! And do you know what? By the end of the night I had raised over $10,000 for our class, with several promises of more in the coming months.

That’s great, but it’s not even the best part….the very best part was that although I was absolutely dreading all of the calls, I actually made several new friends and got a chance to talk to many of the parents whom I haven’t been able to connect with yet through the day-to-day school happenings. And I never would have been able to do that if I weren’t willing to go a little bit out of my comfort zone. (OK, a LOT out of my comfort zone!)

Just a little encouragement in case you are facing something in your life that you are REALLY nervous about like I was…just dive in and GO ALL KUNG FU ON IT– you will surprise yourself! You can do it!

OK, on to the QnA’s!

Q #1: AskMeJon asks, “Never thought inflation was related to the supply of FIAT money. So does deflation mean the decrease in the supply & does this ever happen?”

Answer:
Great question Jon! Yes, deflation is the opposite of inflation and does result from a decrease in the supply of fiat currency. The primary symptom of deflation is a reduction in the price levels for goods and services. The Fed fears deflation tremendously, and in fact will do just about *anything* to prevent it. You may have heard of “Helicopter Ben” Bernanke’s famous speech in which he promised to drop as much money as needed from a helicopter to thwart off deflation.

But is deflation really bad? On the one hand, if everything is cheaper and your currency buys more goods and services than it did before, you feel richer (not bad at all!).

However, deflation is bad for debtors (and as the United States is now one of the most heavily indebted nations in the world, you can see why they prefer modest inflation instead!). If you are a debtor, you feel the pain of deflation because your debt holds steady even though the price of your asset decreases (e.g. the housing market right now– many people are “underwater” and are feeling the pain of their crippling mortgages). Deflation can also spiral quickly into a full-blown depression because banks are likely to significantly cut back lending and other risky ventures.

Deflation also causes people to wait before spending, on the expectation that prices will be lower in the future, which in turn can be a self-fulfilling prophecy. If more people don’t spend “now”, demand decreases and that pushes prices even lower. Businesses then suffer as they have a hard time selling products, but workers usually don’t want to take a pay cut (who can blame them!) so business expenses increase relative to their revenues and they suffer even more. Therefore with no alternatives, businesses lay off workers, which furthers the recession/deflationary spiral…. Not a good situation.

In fact, the Great Depression of the 1930’s was a “deflationary” depression, and Ben Bernanke will do just about *anything* to avoid a repeat of that (including QE to infinity, and beyond!)

So neither inflation nor deflation are “great”…which is why I join with the Austrian economists in demanding a “sound money” system; NOT a fiat-backed currency.

Q #2: AskMeJon also asks, “KFG! If I currently contribute to a 401(k) at work and I want to transfer (say half of the amount in my account) to another “self-directed” Traditional IRA at a financial institution that gives me more flexibility with my investments. Can I pull off this judo move or are my assets trapped until I leave the company?”

Answer:
Another great question! The short answer unfortunately is no, you cannot move part or all of your 401(k) into a self-directed account until you leave your current employer. (At that time, you can roll it over to a self-directed IRA at another institution where you can purchase real estate, gold and silver, and other investments). However, there are certain exceptions granted if you are 59 1/2 or older or if your particular employer plan allows this, but it is extremely uncommon, usually carries penalties, and you would need to ask your current employer to see whether they allow it. (Good luck!)

Q #3:  Shawnda asks, “Can you make a list of “must-read” books in addition to the Jekyll Island one?”

Answer:
Yes, definitely. I’ll send that out next Wednesday… In the meantime, you can’t go wrong with anything from Robert Kiyosaki, particularly his CASHFLOW Quadrant.

Happy Friday, and thank you for reading!

To your financial success,
— Kung Fu Girl