1929 Deflation Started in Europe

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 threats to the U.S. because they infringe on what our government considers its sphere of influence. U.S. military commands divide up the world, because it is taken for granted that the U.S. has some proper military role in every part of the globe, and the U.S. has hundreds of bases scattered around the globe. The President has the ability to wage war largely on his own authority, and when he condescends to consult Congress it is now little more than a formality, so that the phrase “imperial Presidency” is as appropriate now as it has ever been.

Ah, but What about Iraq?” you might ask. We left voluntarily didn’t we? Doesn’t that prove that we are not building an empire? Larison says that doesn’t prove anything.

Just because a state withdraws its forces from a country it has invaded and occupied for years doesn’t mean that it hasn’t acted as an empire does. After toppling a country’s government, installing a new government that it initially believed would be more cooperative and subservient, and occupying its territory against the will of most of the population for almost a decade, the U.S. certainly acted imperially in Iraq… When a government reserves the right to overthrow other governments that oppose its policy goals, it assumes that other states’ sovereignty is so limited that it can and should be violated when it suits the more powerful state. This is how many empires have acted in the past, and so it seems appropriate and accurate to refer to a contemporary American empire.

What Happens in Europe Will Not Stay in Europe

By Elliott Wave International

More than 1,500 years after the fact, scholars still debate the causes of the Roman Empire’s fall.

What historians do agree on is that the crumbling empire’s final days were marked by economic contraction, a struggle to fund Rome’s routine affairs and excessive debt.

Sound familiar?

Mark Twain said, “History doesn’t repeat itself, but it does rhyme.”

That quote seems to apply when economically comparing the Roman Empire, the British Empire and the United States.

Today’s superpower also faces a mountain of debt and a slow economy.

Unlike then, however, the modern economy is global.

So an economic downturn in one major area of the globe is likely to affect another. In fact, even during the Great Depression (long before the phrase “global economy”), Europe was exporting to America.

But one historic export was not the kind that the U.S. welcomed.

The economy is clearly vulnerable to a debilitating wave of debt deflation. The threat is approaching quickly from an important source: Europe. The same sequence of events occurred in 1929, when deflation started overseas before lapping onto U.S. shores.

The Elliott Wave Financial Forecast, January 2012

The Financial Forecast has long kept a careful eye on the threat Europe’s debt crisis poses to the U.S. economy.

The economic slowdown that EWFF characterized in January as Europe’s “top export” is finally reaching foreign shores. Several financial news outlets report that the U.S. and China are now “slipping in sync” with Europe.

The Financial Forecast, June 2012

And recent news registered the economic slowdown.

Small Businesses Grow Wary; See Fewer Hires — Reuters, Oct. 9
IMF Slashes Forecasts for Global Economic Growth — CNBC, Oct. 8
World Bank Cuts East Asia GDP Outlook, Flags China Risks — Reuters, Oct. 7
Europe’s Richer Regions Want Out — New York Times, Oct. 7
Entrepreneurship is ‘weaker than ever’ — CNNMoney, Oct. 5
The U.S. unemployment rate tumbled to 7.8% in September but a broader measure was flat at 14.7%. [emphasis added] – Wall Street Journal, Oct. 5
Orders to U.S. Factories Plunge — Bloomberg, Oct. 4
Spain’s Tax Take Tumbles as Companies Go Abroad — Reuters, Oct. 3
Trade Slows Around World — Wall Street Journal, Oct. 1

Indeed, the European Central Bank recently initiated a new bond buying plan, the Bank of Japan just expanded its asset purchase and loan program, and the Federal Reserve announced QE3.

But don’t count on central bankers to rescue the global economy.

Consider what Robert Prechter said in the July 2012 Elliott Wave Theorist:

The Fed’s actions are short-term inflationary but are setting up a bigger crash than would happen otherwise.

Why do The Fed and other central banks around the world keep making these types of mistakes?

For more information see the Free Report Understanding the FED – How to Protect Yourself from the Common and Misleading Myths about the U.S. Federal Reserve.

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This article was syndicated by Elliott Wave International and was originally published under the headline In 1929, Deflation Started in Europe Before Overtaking the U.S. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Image courtesy of Marcus / FreeDigitalPhotos.net

What Happens in Europe Will Not Stay in Europe

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