Europe is Teetering on the Edge of “Japan-Style” Deflation

Disinflation

Europe: The ONE Economic Comparison That Must Not Be Named... Was Just Named The Continent is now teetering on the edge of a "Japan-style" deflation. Here's our take on it. By Elliott Wave International It's happened. The one economic comparison Europe has dreaded more than any other; the name that's akin to Lord Voldemort for investors has been uttered: "deflation." And it's not just "deflation." You can still spin that term in a positive light if you get creative enough. Say, for example, "Falling prices during deflation actually encourage consumers to spend." But once you add the following two very distinct words, there's no way to turn that frown upside down. And those words … [Read more...]

Why the Fed Does Not Control Inflation and Deflation

Commodities Approaching 3 Year Low

Although we may not always agree with Steve Hochberg's conclusions the following video contains some very thought provoking ideas accompanied by some charts that you probably haven't seen anywhere else.  It's interesting to note the quadrupling of the FED's leverage over the years since 2008 and the amazing lack of inflation associated with it. Check out this excellent six-minute video clip by Elliott Wave International's Steve Hochberg... at the Orlando Money Show. Despite the Fed's leverage and its attempt to inflate throughout the economy, the deflationary pressures in the U.S. are overwhelming. Gain an Advantage Over 99% of U.S. Investors - in Just 15 MinutesYou can … [Read more...]

Deflationary Forces Overpower FED

Federal Reserve Assets

Despite Bernanke's famous helicopter speech the FED's powers really are not unlimited. There is only so much they can do to stimulate the economy. After all they can't force people who are concerned about their future to borrow money. Just like a turtle people naturally recoil and pull back when times are uncertain. And even if they wanted to borrow bankers are reluctant to lend in uncertain times. This results in a phenomenon called Pushing on a String  where no matter how hard the FED tries very little force is exerted on the economy. Robert Prechter believes that this is exactly what has been happening over the last few years where the FED has been trying to stimulate the economy but the … [Read more...]

Deflation Warning: Money Manager Startles Global Conference

Mole hill to Mountain 1929

History shows that the U.S. should pay attention to economies in Europe The economy has been sluggish for five years. There's no shortage of chatter about "why," yet few observers mention deflation. One exception is a hedge fund manager who spoke up at the recent Milken Institute Global Conference. The presentation by Dan Arbess, a partner at Perella Weinberg and chief investment officer at PWP Xerion Funds, was startling because of how deeply it broke from the standard narrative. We've been wrong to assume that the economic crisis is over, Arbess said. ... The threat of deflation is once again rearing its head. "The persistent risk in our economy is deflation not inflation," Arbess … [Read more...]

What is Biflation?

Biflation

Biflation is a relatively new term coined by Dr. F. Osborne Brown, a Senior Financial Analyst for the Phoenix Investment Group in 2003. It is sometimes referred to as "mixed inflation" but it basically refers to a condition where both inflation and deflation occur at the same time. This seemingly contradictory situation is not a real a paradox but simply appears to be one as a result of faulty logic. The problem results from thinking that all prices rise in lock-step in times of inflation but this is clearly not the case. It is quite common for electronics to be declining in price (deflation) while oil and gas are increasing in price. Thus we have "mixed inflation" or "biflation" however … [Read more...]

International Inflation and Deflation Trends over the Past 5 Years

International Inflaiton

International Inflation Rates Had Ups and Downs Over Past 5 Years. The global economy has suffered some serious setbacks since late 2007, with some economists and experts going so far as to call it the "Great Recession," after the 1920s-era Great Depression. And that certainly is an apt term for it, as the spread of the crisis has not been limited to a few countries. Nearly every country in the world has been affected in some way, which is a telling sign of the modern international economy. Inflation is one of the key indicators as to the health of the economy, but it needs to be looked at in context in order to have any value. Economists often use stretches of five years of … [Read more...]

Deflation Not Over?

Theupescalator

The majority of the inflation from 2012 occurred in the first quarter with extremely high monthly rates of inflation.  Overall in 2012 there were 6 very inflationary months (on a monthly basis), 5 slightly deflationary months and 1 very deflationary month (November).  The first month of 2013 started out pretty inflationary but the first quarter of the year generally shows the most inflation for the entire year. See Table … [Read more...]

The Secret Word: Deflation – And the Next Five Years of Financial Turmoil

"Sloping Graph From Coin" by worradmu

The following is a sample from Elliott Wave International's new 40-page report, The State of the Global Markets - 2013 Edition: The Most Important Investment Report You'll Read This Year. This article was originally published in Robert Prechter's July 2012 Elliott Wave Theorist. In the first five months of 2012, there were 20 times as many Google searches on "inflation" as there were on "deflation." This is down from a ratio of 50 times in June 2008. If any theme has been overdone over the past six years, it is the theme of inevitable inflation if not hyperinflation. Inflation reigned for 75 years, from 1933 to 2008. People are so used to it that they cannot imagine the opposite … [Read more...]

Producer Price Index (PPI) and Consumer Sentiment Index Point to Deflation

Producer Price Index

Two Signs That Deflation is Far From Over Producer Price Index (PPI) turns south The federal government defines the Producer Price Index (PPI) as "the average change over time in the selling prices received by domestic producers for their output." With help from the Federal Reserve's massive inflationary policies, the PPI has climbed even as the economy began to fall in 2008-09. All the while, the financial media persisted with stories of an economic recovery. EWI analysts offer an independent perspective. The New York Times declares, "Economic Gloom Starting to Lift." Corporate America, however, is not so sure. This chart of producer prices [wave labels removed] probably … [Read more...]

In 1929, Deflation Started in Europe Before Overtaking the U.S.

Deflation

Marcus Aurelius was the last of the "Five Good"  Roman emperors and is also considered one of the most important members of the Stoic philosophers. He ruled Rome from 161 to 180 AD.  He brilliantly said, "Look back over the past, with its changing empires that rose and fell, and you can foresee the future, too." Today we may be seeing the beginning of the end of the American Empire. As Americans we don't like to think of ourselves as having an empire but according to Daniel Larison, The U.S. treats several key regions of the world as privileged space where it is supposed to have military and political supremacy, and regional challengers to that supremacy are treated as potential … [Read more...]