By Tim McMahon, editor Consumer prices have risen at a meager 1.15% over the last 12 months-- despite massive stimulus and growing commitments from the U.S. government. So what's going on? Deflationary forces are strengthening. They are being spurred on by high unemployment rates creating an overwhelming need for consumers to liquidate their assets for cash. As this new economic phase is becoming a reality, expectations are compounding the effects as explained in recent commentary from the world's largest technical analysis firm. "The economy is moving into a critical new phase, an outright deflation in which 'prices fall because people expect falling prices.' Obviously, this … [Read more...]
The Housing Bubble Revisited
What really makes a bubble? Are bursting bubbles inflationary or deflationary? What lessons can we learn from history? In this article Justice Litle addresses these issues. ~Tim McMahon, editor By Justice Litle, Editorial Director, Taipan Publishing Group A burst housing bubble is a harbinger of deflation, not inflation, due to massive debts incurred and massive savings lost. To really get your head around the inflation debate, it helps to understand the late great housing bubble. To that end, this description seems as informative as they come: The smell of Boom was everywhere. It caught even those who were not particularly attracted by it. A former president of Freddie Mac, … [Read more...]
The Smoking Ruin Solution
By David Galland, Managing Director, Casey Research Just last week, it was reported that the turnout for the Democratic primary was the lowest in 80 years. While the Republicans are clearly energized by their concerns about the direction the Democrats are taking the country in, the Democrats themselves seem to have decided to forgo the voting process, perhaps in favor of a refreshing nap. No question about it, the president is in the hot seat. While I am sure that back in 2008 Barack Obama was one happy camper about having taken the presidential prize, today one has to wonder if that victory has led him to certain bitter regrets. His problem, the problem bedeviling the government … [Read more...]
What is the Economy Usually Doing When Gold Goes Up?
Traditionally when does Gold rise and when does it fall? What economic indicators predict gold prices? In this article Robert Prechter looks at the economy and Gold Prices. ~ editor By EWI President Robert Prechter ...If gold isn’t going up when the economy is contracting, when is it going up? Table 4 (see chart on p. 24 of this free Club EWI report ~ editor) answers the question: All the huge gains in gold have come while the economy was expanding. This is true of the three most dramatic gold gains of the past century: (1) Congress changed the official price of gold from $20.67 to $35 per ounce in 1934, during an economic expansion. The gain against the dollar was 69 … [Read more...]
Worldwide Economic Recovery Slowing
By Tim McMahon, editor The effects of the Trillion Dollar economic stimulus are wearing off and the "recovery" is looking pale and thin. So it may be time to crank up the printing presses again... According the OECD’s latest Interim Economic Assessment, the world economic recovery may be slowing faster than previously anticipated. Growth in the the seven largest developed countries of France, Germany, Italy, Japan, United Kingdom, United States and Canada is expected to be around 1½ per cent on an annualized basis in the second half of 2010 down from the OECD’s previous estimate of around 1¾ per cent in May. … [Read more...]
Inflation and Housing Prices
Being "real tangible assets," houses tend to act as inflation hedges. But in recent times they have appreciated by multiples of the inflation rate. This is due more to loose lending practices that to loose monetary policy. In the following article David Galland addresses the current state of housing prices and where they might be headed. ~Tim McMahon, editor Should You Buy a House Now? By David Galland, Managing Editor, The Casey Report Recently, we have had a number of queries about real estate. And no wonder. For starters, real estate prices have come down. Plus, in an environment with next to zero interest rates, the idea of possibly picking up some income-producing property on the … [Read more...]
Which is Stronger- Inflation or Deflation?
By Tim McMahon, editor Why the Printing Press is No Match for Deflationary Forces- A mere two years ago (although it seems like a lifetime) in August of 2008, inflation was roaring in at 5.37% and the world was talking about hyperinflation. But then along came the housing crash which started the domino effect of deflationary forces. Housing prices, stock prices, asset prices all began falling; triggering margin calls and more liquidation until even Gold (the only investment that is not simultaneously a liability) began to feel the deflationary pressure. By July 2009 a mere 11 months later, everyone was no longer afraid of the inflation monster, but now they were fearing deflation. At … [Read more...]
20 Questions with the World’s Leading Deflationist
20 Questions with the World's Leading -- Perhaps Only True -- Deflationist, Robert Prechter Robert Prechter, the world's leading proponent of the deflationary scenario, answers tough questions from noted financial commentator Jim Puplava. Anyone looking to invest in today's environment should read this revealing new 20-page report. Consider these recent forecasts: In 2005, Prechter warned readers of an imminent top in real estate. In October 2007, Prechter warned that stocks and commodities were historically overvalued and due for an immediate crash. In 2008, Prechter maintained that the U.S. dollar would rally throughout the most volatile market environment since the Great … [Read more...]
The Effects of Fiscal Stimulus are Wearing Thin
The following is an excerpt from Casey's Daily Dispatch... an ezine with thought provoking commentary that I thought you might find interesting. ~ Tim McMahon, Editor Words from the Wise By David Galland, I would like to share just a few snippets I think you’ll benefit from, starting with the latest posting from Ambrose Evans-Pritchard, which you can read in full here. Here’s an excerpt: Today’s release on manufacturing activity by the Richmond Fed is pretty ghastly, as you would expect given that the effects of fiscal stimulus are now wearing off at accelerating pace – before the happy handover to the private sector is safely consummated – and given that the structural … [Read more...]
Deflation: The Black Swan Has Been Spotted
By Nico Isaac Up until recently, the mainstream experts put the likelihood of deflation transpiring in the United States at whatever the current odds are of Mel Gibson finding a date; i.e. nill to none. Their catchphrase for the rare and unexpected nature of a deflationary event was "Black Swan." And as the following news items from 2008-2010 show, very few imagined this "bird" migrating onto the economic shore: Oct. 20, 2008: "Central banks of the world know how to stop deflation. You just print enough money." (Reuters) Jan. 19, 2009: "US Deflation Unlikely. The tremendous stimulus from the US administration... should prevent the recession from dragging on long enough for deflation … [Read more...]
