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Europe: The ONE Economic Comparison That Must Not Be Named… Was Just Named
October 7, 2014 3:31 pmVideo
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It’s happened. The one economic comparison Europe has dreaded more than any other; the name that’s akin to Lord Voldemort for investors has been uttered: “deflation.”
And it’s not just “deflation.” You can still spin that term in a positive light if you get creative enough. Say, for example,
But once you add the following two very distinct words, there’s no way to turn that frown upside down. And those words are “Japan-style” deflation.
Which begs an obvious question: Weren’t Europe’s central banks supposed to prevent this very scenario from happening via their unprecedented, 4-year-long campaign of “money-printing,” bond-buying and interest-rate-slashing?
The answer to that question is… yes. Those actions were indeed supposed to boost inflation.
What’s more, no one can say the European Central Bank didn’t utilize every available tool in their arsenal to try and accomplish that end. The problem is they were fighting a losing battle.
And, we are both happy and sad at the same time to report that from the very beginning, when the first rate cut was loaded into the save-the-economy cannon, we at Elliott Wave International foresaw that Europe’s retreat toward deflation was unavoidable.
Here’s a quick recap of what led us to that conclusion.
— 2011 —
January 2011: The “D” word is way off the mainstream radar. Soaring oil, grain, and commodity prices has fueled widespread fears of runaway inflation. Writes one January 22, 2011 LA Times article:
February 2011: The European Central Bank unveils its brand-new Long Term Refinancing Operations (LTRO), extending nearly half a trillion euros in 3-year loans to banks at negligible interest rates — to stimulate the economy (and inflation).
July 2011: U.K.’s consumer price index declines, prompting a sigh of relief, not a shudder of fear from the Bank of England, who says “we can now breathe a little easier.”
(VS.)
Our August 2011 European Financial Forecast:
September 2011: U.K.’s consumer price index peaks at 5.2% and officially sets the downtrend in motion.
— 2012 —
January 2012: The Bank of England adds another 50 billion pounds to its asset purchase program, bringing its 3-year campaign of “money-printing” to 325 billion. The European Central Bank is less than 14 years old, yet total assets at the ECB breach 3 trillion.
February/March 2012: U.K. producer price inflation comes in higher than expected, prompting one U.K. economist to say: “PPI: Another wake-up call for apoplithorismosphobes,” the clinical term for those who fear deflation. The economist goes on to recommend that sufferers “seek therapy.” (March 12 Wall Street Journal)
(VS.)
Our July 2012 European Financial Forecast:
August 2012 European Financial Forecast makes the first comparison of Europe to Japan:
— 2014 —
May 2014 European Financial Forecast:
September 2014 European Financial Forecast:
The world has finally woken up to the possibility of a Japan-style deflation in Europe — years after the writing was already on the wall.
Now, you need to prepare for what’s to come.
The best part is, Elliott Wave International’s Founder and President, Robert Prechter, as written a book that can help you do just that. And you can read 8 chapters of Prechter’s bestseller, Conquer the Crash, free.
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