What’s Scarier Than DE-flation?
November 28, 2014 12:30 pmVideo
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For the economies of Europe, the past few months have felt like one long ice-bucket challenge that never ends: A perpetual state of shock induced by the bone-chilling fact that deflation
At last count, eight European nations are now in outright deflation, including:
And no, in case you were wondering, it’s not the warm and fuzzy kind of “good deflation” being touted here in the United States, where the only consequence is lower prices. In Europe, it’s the
So, we ask you: What could possibly be scarier than deflation? How about — not even being able to foresee it?
Yes, deflation was a surprise to the financial authorities. Says one Oct. 12 financial blog post:
That’s what should keep adults like you and me up all night — the “never-saw-it-coming” part. Just how safe is our future if the people whose job it is to keep the world’s economies stable lack the tools to predict one of the most dangerous economic conditions?
This recent lack of foresight jives with what former Federal Reserve chairman Alan “The Maestro” Greenspan said in 2008:
It also jives with what some big wig at the Organization for Economic Co-operation & Development said in 2012:
But the fact is — there was — and is — a way to see these deflationary economic sea changes coming.
This chart of the UK Consumer Price Index is a reliable bellwether for inflation in Europe. You can see that price expansion peaked in September 2011 at 5.2%:
At the time, the “D” word was completely off the mainstream radar. Soaring oil, grain, and commodity prices, alongside a stimulus-happy European Central Bank fueled widespread fears of runaway inflation.
One month before the top, Elliott Wave International’s August 2011 European Financial Forecast laid the opposing groundwork:
Here’s what made us take a contrarian stance (among many other reasons):
However, the widespread call for inflation only continued to intensify in the mainstream finance. In fact, in February 2012, when the U.K. producer price inflation came in higher than expected, it prompted this word of advice from economists:
Yet, our July 2012 European Financial Forecast remained committed to its counter claim:
So, it’s now 2014 and deflation in Europe is no longer a specter or a figment of an unbalanced imagination. Here’s a comment from the September 2014 European Financial Forecast:
Now that deflation in Europe is a reality, the question is — will it get better? Is this just a temporary economic condition that will be soon replaced with another one — the condition that economists are much more familiar with, inflation?
We don’t think deflation will surrender quite so easily. Want to learn more about deflation before it could potentially affect your investments?
Today, we invite you to read a free report from Elliott Wave International titled, What You Need to Know About Protecting Yourself from Deflation. This 10-page report will help you understand how you can better prepare yourself for its devastating effects.
Just follow this link to get your free report — and start reading now!