Cold weather, falling wages, bizarre fluke? The real reason consumers aren't spending is... defensive, deflationary psychology By Elliott Wave International Editor's note: You'll find the text version of the story below the video. Learn What You Need to Know NOW About Deflation Get Your Free Report Now » When 2015 began, the mainstream financial experts were certain of one thing: Even if the United States economy were sliding into deflation (which, they said, was open to discussion) that particular kind of Glinda the Good deflation, characterized by plunging energy and food prices, was going to be a boon for consumer spending: "Good deflation a tax cut for … [Read more...]
Deflation: The Elephant in the Room
We've had almost a Trillion dollars in "stimulus" and/or "Quantitative Easing" or whatever you want to call it and as of the end of August 2010 we still only have 1.15% annual inflation... Down from 1.24% last month. And the trend has been steadily decreasing for all of 2010. Back in 2009 we had a period of deflation bottoming at -2.10% in July of 2009 and the stimulus kicked the inflation rate from its deflationary moorings all the way up to 2.72% in December of 2009. But as we can see from the chart below the effect didn't last long... and the inflation rate has steadily declined for all of 2010 so far. In the light of all that stimulus, the biggest credit bubble in history is … [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 Primary Precondition of Deflation
By Robert Prechter, CMT Elliott Wave International The following was adapted from Bob Prechter’s 2002 New York Times and Amazon best seller, Conquer the Crash – You Can Survive and Prosper in a Deflationary Depression. Deflation requires a precondition: a major societal buildup in the extension of credit (and its flip side, the assumption of debt). Austrian economists Ludwig von Mises and Friedrich Hayek warned of the consequences of credit expansion, as have a handful of other economists, who today are mostly ignored. Bank credit and Elliott wave expert Hamilton Bolton, in a 1957 letter, summarized his observations this way: In reading a history of major depressions in the U.S. … [Read more...]
What is so bad about Deflation?
By Tim McMahon The average annual inflation rate dropped again this month. At a monthly rate of -1.01% October's drop was touted as "the largest monthly drop on a seasonally adjusted basis since 1947 when the Bureau of Labor Statistics first started tracking seasonal adjustments" and it brought the annual inflation rate off its highs and down to a more reasonable 3.66%. November's monthly rate was almost twice as large at but it was hardly mentioned in the news. This month the annual inflation rate has dropped down virtually zero-- 0.09% with a monthly drop slightly larger than the one two months ago. Just a few months ago the annual inflation rate was 5.6% and now it is … [Read more...]
Deflation or Hyperinflation?
By Tim McMahon, Editor The monthly inflation rate dropped like a rock for the second month in a row. Journalists touted last month's drop as "the largest monthly drop on a seasonally adjusted basis since 1947 when the Bureau of Labor Statistics first started tracking seasonal adjustments". What are they going to say this month when it is almost twice as large? Largest drop since last month? This is real live deflation on a monthly basis (although not on an annual basis... yet). Basically, deflation is falling prices (or more accurately a decrease in the money supply that results in falling prices) while disinflation is a slowing of the rate of increase in prices. Are we in a … [Read more...]
Take action in a Deflationary Environment
Editor’s Note: In the following article Robert Prechter shows you how to prepare for a deflation. By Robert Prechter, CMT The ultimate effect of deflation is to reduce the supply of money and credit. Your goal is to make sure that it doesn’t reduce the supply of your money and credit. The ultimate effect of depression is financial ruin. Your goal is to make sure that it doesn’t ruin you. Many investment advisors speak as if making money by investing is easy. It’s not. What’s easy is losing money, which is exactly what most investors do. They might make money for a while, but they lose eventually. Just keeping what you have over a lifetime of investing can be an achievement. That’s … [Read more...]
Making Preparations and Taking Action in Today’s Deflationary Environment
Editor’s Note: In the following article Robert Prechter shows you how to prepare for a deflation. By Robert Prechter, CMT The ultimate effect of deflation is to reduce the supply of money and credit. Your goal is to make sure that it doesn’t reduce the supply of your money and credit. The ultimate effect of depression is financial ruin. Your goal is to make sure that it doesn’t ruin you. Many investment advisors speak as if making money by investing is easy. It’s not. What’s easy is losing money, which is exactly what most investors do. They might make money for a while, but they lose eventually. Just keeping what you have over a lifetime of investing can be an achievement. That’s … [Read more...]
What is Deflation?
Define Deflation: In common usage deflation is generally considered to be "falling prices". But there is much more to it than that. Often people confuse deflation with disinflation or with Depression (as in "the Great Depression"). These three terms are related but not synonymous. According to Investorwords.com the definition of Deflation is "a decline in general price levels, often caused by a reduction in the supply of money or credit. Deflation can also be brought about by direct contractions in spending, either in the form of a reduction in government spending, personal spending or investment spending. Deflation has often had the side effect of increasing unemployment in an economy, … [Read more...]