23/09/2010 – Deflation: The Trend That’s Become Too Obvious To Ignore

So what’s keeping inflation at bay, given all the stimulus money promised?
The answer: Deflation —
an overwhelming urge for consumers to liquidate their assets for cash. And
this new economic phase is finally becoming too obvious to ignore, 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 implies an element
of recognition, as efforts to protect against indebtedness
and falling prices contribute to further declines. We can tell
deflation is entering a new stage because of the language and
ideas that financial observers now use to describe it.”
— The Elliott Wave Financial Forecast (September 2010)

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reveals the biggest threat to your money right now. You’ll learn
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Here are a few recent comments about the new economic reality:

• “[New Jersey Governor] Christie spelled out the details
  of his proposal Tuesday. They include: repealing an increase
  in benefits approved years ago; eliminating automatic cost-of-living
  adjustments; raising the retirement age to 65 from 60 in many
  cases; reducing pension payouts for many future retirees; and
  requiring some employees to contribute more to their pensions.” — Associated
  Press (Sept. 15)
• “U.S. Home Prices Face Three-Year Drop as Inventory
  Surge Looms” — Bloomberg (Sept. 15)
• “Atlanta Awash in Empty Offices Struggles to Recover
  From Building Binge” — Bloomberg (Sept. 14)
• “The world economy faces a long, hard slog toward recovery
  and could slide into deflation and financial instability if
  leaders fail to deliver on promises of reform.” — Reuters (Sept.
  10)
• “Deflation seems to have the upper hand lately in the
  debate among investors about inflation versus deflation.” — Marketwatch (Sept.
  8)
• “With the release of the August sales figures, one thing
  is clear for car shoppers — it’s a buyer’s market.” — Edmunds (Sept.
  2)
• “20 Funds to Guard Against Deflation” — Smartmoney (Aug.
  29)
• “Dividend-Yield Signal Screams Deflation” — Forbes (Aug.
  25)

The word “deflation” also started appearing more in
the financial media around 2002, but Robert Prechter, president
of technical analysis firm Elliott Wave International and author
of the 2002 New York Times best-seller Conquer the Crash,
added in the updated 2009 edition of his book that the deflation
references back then were in an entirely different context:

“The rarely used word deflation has become fashionable
in financial discussion. … It is fashionable, however, not
to predict its occurrence but primarily to dismiss the
idea that it has any serious likelihood of occurring. The president
of the Federal Reserve Bank of Dallas said in May [2004] that
there is ‘maybe one chance out of four’ that deflation will
occur.”
— Conquer the Crash, 2nd edition (2009)

And Prechter says the opinion from the Federal Reserve Bank
of Dallas was not an isolated outlook at the time. Here’s another
quote from around the same time:

“Not one economist [of 67 surveyed] said it was ‘very
likely’ the economy would slip into deflation, and only 6%
said it was ‘somewhat likely.’ About 95% said deflation was
‘not very likely’ to happen.” — Barron’s (2003)

In hindsight, we know that economists — in the aggregate —
were dead wrong about their deflation predictions.

As we saw above, references to “deflation” are increasing
now — because it’s obvious.

So if economists were unable — or worse, unwilling — to warn
you in advance about the threat of deflation a few years ago,
what are they not warning you about now?

Get
an independent look at the future of the U.S. economy by reading
Robert Prechter’s FREE Deflation Survival Guide now.
Newly updated for 2010, Prechter’s 90-page ebook on deflation
reveals the biggest threat to your money right now. You’ll learn
not only how to prepare for deflation and adapt during it; you’ll
also learn how to survive it and — most important — prosper
during it, so you’ll be ready for the buying opportunity of a
lifetime at its end. Click
Here to Download Your Free 90-Page Deflation eBook Now.