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...]
Which is Better: High or Low Inflation?
It would seem intuitively obvious that low inflation is good for consumers, because costs are not rising faster than their paychecks. The problem with high inflation is that even with "cost of living" increases there is a time lag between when the cost of goods increases and when you get your raise. But recently commentators have been saying that "Low inflation introduces uncertainty". This is nonsense. During the high inflation "Eighties" I remember commentators saying "High Inflation introduces uncertainty". This is not quite true either. The truth is that steady inflation, whatever its level, if it can be relied upon to remain steady, does not introduce uncertainty. Changing … [Read more...]
Deflation or Inflation – Which is it?
By Tim McMahon, Editor It seems the debate on whether we will be facing inflation or deflation is heating up. This week I received emails from two different subscribers insisting that I was wrong. Well that is always a possibility but we will see... The first letter I received was from Jeff L. it said, "Your current "Annual Inflation" chart, graph, and commentary are very helpful. Thanks very much. The data would appear to contradict a recent article on your own site predicting a long period of deflation." My response was, "Personally, I think we are in for inflation. Robert Prechter (who is much smarter than I am) believes it will be deflation. At this point we are on a “knife … [Read more...]
Gold… the Timeless Inflation Hedge
In the article Is Gold really a good Inflation Hedge? I said, Gold is actually a "crisis hedge." But here Jeff Clark tells us how gold can also be a store of wealth and a long term inflation hedge.~Tim McMahon, editor What Do You Have in Common with King Nebuchadnezzar? By Jeff Clark, Editor, Casey’s Gold & Resource Report “There’s no reason to invest in gold,” said the finance editor of a major newspaper interviewing me. “If gold goes up because of inflation, then so does everything else, so why buy it? It’s not really a good investment.” She was serious. Yes, she is a finance writer. And yes, it’s a newspaper you’ve heard of. I was so dumbfounded that I must have sounded … [Read more...]
Healthcare Is Killing America
by Bud Conrad, Editor, The Casey Report Healthcare is the biggest segment of our economy. In the debate over who should pay for what or, increasingly, for whom, most people don't stop to understand just how large a portion of our society's money is dedicated to healthcare. For some perspective, as a share of GDP, the U.S. spends about twice that of other advanced nations. This is an important reason why the U.S. is increasingly uncompetitive in global manufacturing. It is, for instance, the most important factor (besides poor management) that General Motors and Chrysler are going bankrupt. Going forward, the situation is guaranteed to get worse. The Obama administration is committed … [Read more...]
Inflation is Not Coming…It Has Arrived!
By Jon Herring Don’t be deluded into thinking that inflation “might be coming” in the future and that once you see the signs you can protect yourself. Inflation is already here. And if you wait too long to take precautions, this silent thief will most certainly steal your wealth and savings. You must act NOW if you wish to protect what you have worked so hard for. Take the right actions today, and you can not only insure your wealth against erosion by inflation… you can generate life-changing profits as well. First, it is important to have a proper understanding of inflation. Most people believe that the definition of inflation is rising prices. This is not true. The definition of … [Read more...]
Deflation and Depression through the Years
By Tim McMahon, Editor Deflation has cropped up at various times throughout the nineteenth and twentieth centuries. Overall since 1913 when the Bureau of Labor Statistics began tracking inflation we have had 22 years that had one or more months when the annual inflation rate was negative (i.e. deflation). Most of those are clumped into larger deflationary periods. The six major deflationary periods are: January 1921 - February 1923 26 months July 1924 - November 1924 5 months July 1926 - November 1933 7 ½ years (with only 5 positive months and 5 zero inflation months.) March 1938 - January 1940 18 months May 1949 - June 1950 … [Read more...]
In Inflation Everything is More Expensive
Not Even Crack Heads Can Escape this Economy By Charles Delvalle Everyone’s having a hard time in this economy, even crack heads. We’ve all been talking about how wicked inflation has been over the past two years. Apparently Gus Young Jr. of West Palm Beach wasn’t listening. In a fit of rage, he destroyed a DVD case and a Plexiglass counter after his friendly neighborhood drug dealer told him that the price of a rock of crack cocaine had gone from $10 to $20. And get this: on the way to jail, he shared his displeasure of the inflated crack prices with officers. Let this be a lesson that nothing escapes the reach of inflation. Not milk, butter, or in this case, crack. This … [Read more...]
Three Myths of Deflation and Recession
This article is part of a syndicated series about deflation from market analyst Robert Prechter, the world’s foremost expert on and proponent of the deflationary scenario. For more on deflation and how you can survive it, download Prechter’s FREE 60-page Deflation Survival eBook, part of Prechter’s NEW Deflation Survival Guide. The following article was adapted from Robert Prechter’s NEW Deflation Survival eBook, a free 60-page compilation of Prechter’s most important teachings and warnings about deflation. By Robert Prechter, CMT Myth 1: “War Will Bail Out the Economy” … [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...]
