The U.S. Bureau of Labor Statistics (BLS) released the Consumer Price Index (CPI-U) data today for the month of January. The verdict was that inflation had fallen rapidly from 0.76% in December to a slightly deflationary -0.09% for the 12 months ending in January. This is the first time since 2009 that we have seen Annual deflation although there were several times during 2014 that we saw monthly deflation. Monthly deflation (annual disinflation) means that prices are slightly lower than they were last month but still higher than a year ago, which typically happens a few times every year (generally in the 4th quarter), but this year prices began falling during the summer, indicating … [Read more...]
Japanese Superman Meets Economic Kryptonite
Abenomics: From Faith to Failure Why the biggest monetary stimulus effort in the world did NOT stop deflation in its tracks By Elliott Wave International When Shinzo Abe became the Prime Minister of Japan in December 2012, he was regarded with the kind of reverence that politicians dream about. He was featured in a hit pop song ("Abeno Mix"), hailed as a "samurai warrior," and featured on the May 2013 The Economist cover as none other than Superman. But in the two short years since, Abe as Superman has been struck down by the superpower-zapping force of economic kryptonite. On November 17, government reports confirmed that Japan's brief respite from a 20-year long entrenched … [Read more...]
Inflation Flat for October
The Bureau of Labor Statistics released the Inflation rate for the month of October today. Annual inflation remained steady at 1.66% even though prices fell from the month previous (i.e. monthly inflation was -0.25%). However, since monthly inflation was -0.26% in October 2013 annual inflation rates remained virtually identical as October 2013 was replaced by October 2014 in the calculations. The FED has stated that it's goal is to maintain inflation at a steady 2%. But as we can see from the chart they have rarely achieved that goal. If the goal was to remain below 2% we could say they have done very well since 2012 however during that time-period the FED has been fearing deflation … [Read more...]
Inflation or Deflation? – Yes
Over the years we've published a variety of articles on the inherent "tug-of-war" between inflationary and deflationary forces in the world including How can we have Inflation and Deflation at the same time? and Battle of the 'Flations both from back in 2008 and Deflation or Inflation - Which is it? in 2009 and Which is Stronger- Inflation or Deflation? in 2010. Another recurring theme has been Velocity of Money and Money Multiplier- Why Deflation is Possible and today John Mauldin will take a stab at each these critical topics once again. Understanding their interrelationships will greatly help you understand the monetary forces at work.~ Tim McMahon, editor The Flat Debt Society By … [Read more...]
Europe is Teetering on the Edge of “Japan-Style” Deflation
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
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
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
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 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...]
The Secret Word: Deflation – And the Next Five Years of Financial Turmoil
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...]
