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Contrary to what you are hearing in the media, the worst economic news may still lie ahead: A deflationary depression is descending upon us. Could it help the conservative movement? Breakneck federal printing of debt and dollars, gold and stocks rising, the dollar falling -- surely these trends presage inflation, or even hyperinflation. So goes the narrative across the media. But a contrarian and increasingly likely view is that deflation, not inflation, awaits.* What is deflation? How will it develop? How will it affect us? And what does it mean for the Democrats' future? Most of us have known only...

Deflationary Myth Is Poor Excuse For Irresponsible Policy Excesses New figures show that UK inflation was 1.9pc during the 12 months to the end of November, up from 1.5pc the month before. That was "above consensus estimates". By Liam Halligan Published: 7:19PM GMT 19 Dec 2009 Having said that, British inflation, to use investment bank parlance, has "surprised on the upside" pretty much every month for the past two years.> Ever since this crisis began, economists in the City of London have underestimated UK inflation and warned, instead, that "deflation" looms. As a result of this threat, policymakers have had...

NEW YORK – Gold prices have been rising sharply, breaching the $1,000 barrier and in recent weeks rising towards $1,200 an ounce and above. Today’s “gold bugs” argue that the price could top $2,000. But the recent price surge looks suspiciously like a bubble, with the increase only partly justified by economic fundamentals. Gold prices rise sharply only in two situations: when inflation is high and rising, gold becomes a hedge against inflation; and when there is a risk of a near depression and investors fear for the security of their bank deposits, gold becomes a safe haven. The last...

Can Inflation Fix The US Economy? By Bill Bonner 12/16/09 Zurich, Switzerland – Are we in a depression yet? The number of Americans living on food stamps has risen to 37 million. Food stamps are the soup lines of the ’00s. And what else was big in the ’30s? Escapist movies. Here’s a headline for you: “Box office takings set to smash records,” says The Financial Times. What kind of movies? End of the world catastrophes…vampires…strange non-humans doing strange things. For example, there are ads for Avatar all over Europe. The film seems to concern Spock-like creatures that use bows...

"90% of the people believe the economic problem is in the process of being resolved and that 2010 will be significantly better, even though many admit there might be some short term set backs on the way to the recovery. Government officials, many economists, and the vast majority of market analysts are saying it is so. This writer and a very small minority say the truth is that a terrible, deflationary depression is probably starting in the coming months. Here is why people like me think this."

Deflationary Economic Depression 2010, Ready Or Not Here It Comes! Economics / Great Depression II Dec 06, 2009 - 08:31 PM By: Darryl R Schoon Much has been written about the Great Depression and the present crisis. There is much that is similar and some that is not. The differences explain why events have unfolded differently. The similarities explain why the end will be the same. Deflationary depressions occur after the collapse of large speculative bubbles. The collapse of the 1920s US stock market bubble, then the largest bubble in history, caused the Great Depression of the 1930s. The collapse...

Recession, Depression, Deflation, Inflation, Collapse Or Recovery? Mac Slavo December 03, 2009 The International Forecaster, Bob Chapman, discusses The Fed’s options for 2010 and what effect their decisions will have on the economy in Potential for Fed To Hyperinflate: The following information may be the most important we have ever published. One of our Intel sources, highly placed in banking circles, tells us that on 1/1/10 all banks that have received TARP funds have been informed by the Federal Reserve that they must further restrict any commercial lending. Loans have to be 75% collateralized, 50% of which has to be...

Consumer-Driven Deflation? Not Even Close by: Paco Ahlgren December 01, 2009 “Inflation is the senility of democracies” -- Sylvia Townsend Warner If you ask the average person to define inflation, you get this response: “Rising prices.” Similarly, the same person would likely define deflation as falling prices. But both answers are incorrect -- in fact, they’re gross misrepresentations of the words, and this simple, but popular misconception is the root of every single economic problem we face today. Rising prices do not cause inflation, nor are they inflation. On the contrary, rising prices are the result of inflation. Specifically –...

Japan Government Says Economy Back In DeflationRolfe Winkler Fri Nov 20, 2009 1:03am EST TOKYO, Nov 20 (Reuters) - Japan's government said for the first time since 2006 that the economy was back in deflation, warning of the risk that price falls may pressure a fragile economy barely out of its worst recession in decades. The announcement came as the Bank of Japan kept interest rates near zero and upgraded its economic assessment, despite grumblings from the government, which is worried about price falls and the risk of another recession. "Recent price developments show that the Japanese economy is in...

Deflationists Are WRONG, Prepare For The INFLATION Mega-Trend Economics / Inflation Nov 18, 2009 - 12:58 AM By: Nadeem Walayat The jist of the deflationists argument is that debt deleveraging MUST trigger huge consumer and asset price deflation. Whilst we have all witnessed huge asset price deflation and some consumer price deflation during 2008 and into 2009. However we have also witnessed unprecedented government and central bank actions of this year, which have ignited asset price inflation with more to come that is now starting to feed into consumer price inflation. Why do deflationists have it wrong ? It is...

Only A New Credit Bubble (That Isn’t Coming) Staves Off Deflation Economics / Liquidity Bubble Nov 16, 2009 - 09:03 AM By: Chris_Galakoutis The next issue I wanted to write about in this post is this whole notion of ballooning reserves at the Fed, and how we get to hyperinflation if this money were to ever be lent out and multiplied across the economy. Reserves might have gone from 10 Billion in August 2008, to about 1 Trillion today, but in fact, this money is not being lent out – it is simply sitting there at the Fed, earning interest....

Where You Find Inflation In A Deflationary World By Rocky Vega 11/13/09 Oslo, Norway – Deflation or inflation? It’s the ongoing debate that Dr. Duru tackles in tracking creeping inflation throughout the economy. Sure, deflationary fears have been stoked by credit destruction, but he believes quantitative easing and stimulus are causing inflation to rear its ugly head, “here and there.” And far beyond “here and there,” his biggest concern is of inflation “here, there and everywhere.” He cites Bill Fleckenstein to explain… “[I]n a period where fears of deflation rage and too much capacity exists for so many products, it...

Continuing Deflation In The “Real Economy” By Bill Bonner 11/10/09 Montevideo, Uruguay – Financiers have the world’s financial system in a “doom loop,” says the Bank of England. We’ve thought so ourselves. The bankers take money from the government and use it to speculate, not to lend. “Excess” reserves are at a record high as consumer credit continues to decline. Most people find it both galling and absurd to see the bankers getting $10 million bonuses while there is 10% unemployment. Here at The Daily Reckoning, it’s just a matter of curiosity. You’d think there would be more wage competition...

Demand continues to be strong – even Harrods, the famous Knightsbridge store, is getting in on the act by selling gold bars and coins to its upmarket customers. Gold has returned more than 20pc over the past year but the question remains: how high can the price of gold go? Here are the thoughts of analysts taken from around the globe. Suki Cooper, commodities analyst, Barclays Capital Ms Cooper said: “We expect prices to maintain their upward momentum through to at least the first half of 2010, where we expect prices to average $1,140 in the second quarter. The unexpected...

The Path To Runaway U.S. Inflation Economics / Inflation Nov 06, 2009 - 10:35 AM By: Ganesh_Rathnam "I see green shoots," said Fed Chairman Ben Bernanke on 60 Minutes back in March, doing his best rendition of Haley Joel Osment from the movie The Sixth Sense. Since then, every poor economic headline in the lapdog media has been preceded with the word "unexpected," as if the clueless chairman's pronouncements were suddenly the Gospel, and the economy had indeed recovered. Phantom US Economic Recovery Common sense tells us that if phenomenon A causes problem B, then B cannot be rectified unless...

NEW YORK, Nov 6 (Reuters) - Gold futures in New York rose to a record above $1,100 per ounce on Friday as the dollar eased in the wake of disappointing U.S. employment data. At 9:48 a.m. EST (1448 GMT) December gold GCZ9 was up $10.20 at $1,099.50 an ounce at the COMEX division of the New York Mercantile Exchange, having topped at $1,101.90 in morning trade. Spot gold XAU= reached a record at $1,100.90 per ounce.

{snip ...] "Since interest rates are zero, you can borrow dollars at no cost at all and use them around the globe," says Jeffrey Kleintop, chief market strategist of LPL Financial, a privately held brokerage firm based in Boston. "For example," explains Kleintop, you can borrow dollars at zero, and invest in Brazilian bonds yielding 5.2%. As the real (Brazil's currency) has risen 26% against the dollar so far in 2009, such a carry trade would have earned 31%, or double the loss of value in the dollar. Gold and oil, especially, have an inverse relationship to the dollar, underscores...

NEW YORK (MarketWatch) -- The U.S. and the global economy will experience massive deflationary forces through 2012, said Nouriel Roubini, economist at New York University, Wednesday. At a conference, Roubini said that although easy monetary policies have fueled another asset bubble, the deflationary forces coming from industrial overcapacity, falling labor costs and a still damaged financial system will prevail over the next two years.

Is Debt-Deflation Economic Depression Just Beginning? Economics / Great Depression II Nov 02, 2009 - 03:12 AM By: Mike_Shedlock Last Thursday I received an email from David Meier, Associate Advisor at the MotleyFool concerning Debt-Deflation. David asked if I had any comments on his article Debt-deflation: Just the beginning? Here is a partial listing: The debate rages on. Is inflation or deflation the bigger threat? There are lots of people -- lots of smart people -- on both sides of the debate and they present lots of good arguments. One thing that I have not seen -- and maybe I...

Buy Food – Price Rises Are Almost Guaranteed By Garry White Published: 7:50PM GMT 25 Oct 2009 There are two main drivers of commodity prices – supply and demand. This is just as true with soft commodities such as wheat, rice, sugar and cocoa as it is with copper and tin. The big problem for your weekly shopping budget in the future is that there are problems on both sides of the equation that are likely to squeeze prices higher, permanently. However, this also provides a great investment opportunity and now is a good time to buy into many areas...

Deflation Fears As Eurozone And US Credit ContractsBank lending to firms and households in the eurozone has fallen for the first time, raising fears of an economic relapse and a slide into deflation next year. By Ambrose Evans-Pritchard Published: 8:26PM GMT 27 Oct 2009 Data from the European Central Bank shows that the M3 broad money supply has contracted over the last six months, confounding expectations that ultra-low interest rates would soon boost monetary growth. Loans to the private sector fell 0.3pc from a year earlier, the first such decline since the data started in 1983. The M3 figures include...

U.S. Faces Second Lost Economic Decade Because Of Misguided Stimulus Economics / Great Depression II Oct 23, 2009 - 04:00 PM By: Mike_Shedlock Japan has gone through two lost decades, in and out of deflation, with nothing to show for it but increasing debt to GDP and a stock market still 70% below its peak. Now, Richard Koo of Nomura Research Institute Ltd. says U.S. Risks Japan-Like ‘Lost Decade’ on Stimulus Exit. U.S. officials contemplating an exit from record fiscal stimulus are in danger of repeating mistakes that plunged Japan into its lost decade of stagnant growth, according to Richard...

Harry Dent Sees A Big Crash Coming, Urges Investors To Prepare By Rocky Vega 10/20/09 Stockholm, Sweden – In an interview with Moneynews, Harry Dent, author of The Roaring 2000s Investor and The Great Depression Ahead, said that “deflation in turn will trigger crashes in stocks, bonds and real estate.” According to Dent, the deflation will be caused by “way too much debt in our system,” and he advises investors to stay in cash. His debt calculation includes corporate at $11 trillion, government at $14 trillion, and the financial sector at $17 trillion. The solution he suggests is that “we...

PPI: Freezing ("Below Zero" Deflation Alert)y Karl DenningerOctober 20,2009 But I thought Bennie And The Feds programs were working? The Producer Price Index for Finished Goods declined 0.6 percent in September, seasonally adjusted, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. This decrease followed a 1.7-percent rise in August and a 0.9-percent decline in July. In September, at the earlier stages of processing, prices received by manufacturers of intermediate goods moved up 0.2 percent and the crude goods index fell 2.1 percent. On an unadjusted basis, from September 2008 to September 2009, prices for finished...

US Hyperinflation? By Chuck Butler10/20/09 St. Louis, Missouri – The finance ministers of the Eurozone met yesterday and they’ve tried to stem the euro’s (EUR) rise… But they’ll need more than words to get the job done! And so we begin a new day… Front and center this morning, the currencies – which had given background overnight to the dollar – are back in rally mode, and are taking liberties with the dollar once more. For most of the night, that was not the case, though. The dollar had rallied back and sent the euro, for instance, to the 1.48...

Producer Prices Plunge Joe WeisenthalOct. 20, 2009, 9:15 AM Today's PPI for October showed deeper deflation than anyone expected. The Producer Price Index for Finished Goods declined 0.6 percent in September, seasonally adjusted, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. This decrease followed a 1.7-percent rise in August and a 0.9-percent decline in July. In September, at the earlier stages of processing, prices received by manufacturers of intermediate goods moved up 0.2 percent and the crude goods index fell 2.1 percent. On an unadjusted basis, from September 2008 to September 2009, prices for finished...

Three Asset Classes That Can Actually Outpace Coming Inflationary Price Increases by: Paco Ahlgren October 19, 2009 This “Excess capacity is temporarily suppressing global prices. But I see inflation as the greater future challenge." - Alan Greenspan, June 25, 2009 "The US economy may witness double-digit inflation in a few years unless the central bank tightens up its monetary policy… Unless we roll in this whole degree of expansion, we will be in trouble… I am not talking 3-5 per cent inflation, I am talking double-digit inflation in the US.” - Alan Greenspan, September 9, 2009 -- Man, the Dow...

In 2001 the late Jude Wanniski observed in the American Spectator that "Only when we fully grasp the importance of this definition of inflation or deflation will we be able to understand how to rid the world of these twin evils." Wanniski knew well that it is the instability in the value of the money that drives major economic error. When money is fluctuating in value, the money prices of all investments become distorted and mistakes are made. During periods of inflation, capital moves into the assets of the earth such as housing and gold that are least vulnerable to...

Japan A Deflation Death? - Nope Stagflation Oct 17, 2009 - 12:29 PM By: Phill_Tomlinson Gordon Brown this week announced what can only be described as a car boot sale of UK PLC's bric-a-brac goods, an attempt to sooth markets regarding the budget deficit. Many of the items have been for sale before, but I'm sure the government in their current desperation will be willing to accept lower offers this time around. I agree with privatisation in getting the state out of our lives, but a student loan book and a crossing in Kent are hardly big ticket items, never...

The New Global Balance – Part II: Higher Rates Rather Than Weaker Dollar In 2010 Christian Broda Piero Ghezzi Eduardo Levy-Yeyati 16 October 2009 Many expect the dollar to continue to depreciate over the foreseeable future. This column suggests that it may strengthen in 2010 if the Federal Reserve exits quantitative easing sooner than its counterparts and the US economy enjoys a strong rebound. In the early months of the crisis at the end of 2008, the US dollar rose sharply as US interest rates fell sharply (IMF 2009). In a previous column, we argued that the puzzling response of...

Deflation Could Cause First Minimum Wage Cut Ever Vincent FernandoOct. 15, 2009, 1:34 PM Deflationary forces might take their toll in a very tangible way for Colorado's minimum wage earners. The state could be the first ever to adjust down minimum wage due to a falling consumer price index. While the minimum wage will only fall four cents per hour, if passed it will clearly be an extraordinary example of discipline. USA Today: Other states with adjustable minimum wages have seen their consumer price indexes fall, such as Ohio. But Colorado is one of the few states where the law...

{snip} Currently, dollars account for about 62 percent of the currency reserve at central banks -- the lowest on record, said the International Monetary Fund. Bernanke could go down in economic history as the man who killed the greenback on the operating table. After printing up trillions of new dollars and new bonds to stimulate the US economy, the Federal Reserve chief is now boxed into a corner battling two separate monsters that could devour the economy -- ravenous inflation on one hand, and a perilous recession on the other. "He's in a crisis worse than the meltdown ever was,"...

Inflation Sinks to Five-Year Low On Lower Utility And Food BillsInflation fell more sharply than expected in September, hitting a five-year low of 1.1pc, on lower utility and food bills. By Angela Monaghan Published: 7:16PM BST 13 Oct 2009 Economists had expected the consumer prices index (CPI) to fall less steeply to 1.3pc from 1.6pc in August. The main drivers of the drop, revealed in data published by the Office for National Statistics yesterday, were a 7.2pc fall in electricity prices and a 5.6pc fall in gas prices compared with a year ago. It was the fourth month in a...

Trending Towards Hyperinflation Economics / HyperInflation Oct 09, 2009 - 04:00 PM By: Paul_Tustain Seven short steps to the cost of living doubling or more inside 3 years... HYPERINFLATION is widely accepted as a period of out of control price rises, doubling the cost of living inside three years. It occurs when a currency loses its ability to store value, encouraging long-term savings to pour into circulation where they swamp the much narrower supply of consumer money, and cause the whole lot to lose purchasing power. There is no specific recipe, but the pattern we risk repeating today would be...

Faces of Death: The U.S. Dollar in Crisis by: Ron Hera October 09, 2009 /snip Following two sequential economic bubbles, the dot-com bubble and the real estate bubble, no one has yet correctly called either the bottom for the US economy or the start of a US economic recovery. Nonetheless, each day, news reports, articles and statements by officials and commentators reveal new economic data and offer new analysis. Unfortunately, both the economic data and the interpretations offered by officials and commentators are contradictory. It appears that both inflation and deflation are occurring at the same time; that the US...

It's not only the energy markets that threaten the 'low inflation' data now encouraging bondholders to keep buying... THE PUBLISHED INFLATION DATA are surprisingly unsophisticated in so far as they compare current prices with a snapshot a year earlier. Just over a year ago, oil was every hedge fund manager's favorite speculation. In summer 2008 a barrel got to well over $140, before falling sharply back. You may remember the food riots of early 2008, and how they seem to have disappeared. Well, that occurred after a small dip in world grain production in 2007. Fortunately, by its end, 2008...

On the Edge With Max Keiser, Risk of Deflationary Economic Collapse Economics / Deflation Oct 04, 2009 - 02:35 PM By: Mike_Shedlock Janet Tavakoli is On The Edge With Max Keiser. Tavakoli says the Risk of deflationary collapse greater now than in 2007. We’ve just interviewed Janet Tavakoli for our first episode of The Keiser Report. If you don’t know her, you should. She wrote a fantastic book, Dear Mr. Buffett. Max and I are on our second read of it. You really must get this book if you want to understand derivatives from one of the foremost experts on...

We Are Certainly in a Deflationary Economic State Oct 02, 2009 - 07:20 AM By: Mike_Shedlock Fueled by overcapacity, shrinking credit, reduced corporate spending and falling consumer demand, Deflation is taking root in global economies. Consumer prices fell at their fastest clip ever last month in Japan, which has been fighting a losing war against deflation for much of the past two decades. Germany, Europe's biggest economy, has now suffered through four consecutive months of sliding prices, and the rest of the region that uses the euro is not faring much better. That deflation should be such a threat may...

Japan is sliding into the deepest deflation since the Second World War, forcing the new-broom Democrats to abandon their strong yen policy within weeks of taking office. BY AMBROSE EVANS-PRITCHARD Core inflation fell a record 2.4pc in September, a steeper drop than at any time during the country's Lost Decade. A surging yen is twisting the knife further. The currency has risen 22pc against the euro, 27pc against the dollar, and 43pc against sterling since mid-2007. Hirohisa Fujii, finance minister, ditched his non-intervention policy yesterday, saying Tokyo would "take necessary steps" to prevent disorderly currency moves. Yen strength is asphyxiating...

Japan prices tumble at record rate in August Japan core consumer price index falls by record 2.4 percent in August By Tomoko A. Hosaka, Associated Press Writer On Monday September 28, 2009, 9:17 pm EDT TOKYO (AP) -- Prices in Japan tumbled at a record pace in August, intensifying concerns that deflation could undermine the country's fragile economic recovery. The country's key consumer price index, which excludes volatile fresh food prices, fell 2.4 percent from a year earlier amid rising unemployment and falling wages, the government said Tuesday. The figure marks the steepest decline since officials began compiling comparable data...

Gold bullion just crossed $1,000 an ounce. But what's it really worth? Bud Conrad, chief economist at Casey Research and a leading gold bug, says it's worth far more. Based on long-term analyses of macroeconomic trends such as the money supply, he says, "a lot of ratios… get you into the $4,000 to $5,000 level without any problem. Congressman and former presidential candidate Ron Paul also a major gold bug likewise sees the price of bullion rising from today's levels. "It's trebled in the last ten years," he says. "There's no reason it can't triple in another ten years, that...

WASHINGTON (AP) -- Worker productivity, the single biggest factor determining living standards, grew at the fastest pace in nearly six years in the spring while labor costs fell by the most in nine years, as companies slashed costs to survive the recession.

Now that we are just about 2 years into the world financial/credit crisis, it’s time to ask what is next in one or two years. One is to ask will stagflation emerge in 2010 and after? We may be moving from a two year crisis stage to a post stage of stagflation that lasts years. There are several aspects to clarify first. First, assuming there is NOT another credit meltdown this Fall/Winter, and the USD does NOT have a big devaluation event, but rather tails down gradually, then I expect stagflation to emerge. The US and Western economy could do...

In recent weeks and months, there’s been much public debate in the financial press whether we’re going to hyper-inflate or suffer a deflationary collapse? I know this to be the case because I field many questions about this topic from readers around the world on a regular basis. To better understand which of these two competing forces will ultimately win the day, let’s consider the following observable basics: * In a hyper-inflation, the value of currency [in this case, fiat money] is driven toward zero as prices rise. * In a deflationary collapse, the value of currency increases as prices...

The developed world has not shaken off the risk of sliding into a deflation trap, experts warned after new figures showed that prices in both the eurozone and the US are falling. Consumer prices in America slipped by 2.1pc in the year to July, according to official data released yesterday. It coincided with Eurostat figures showing that the eurozone's consumer price index dropped by 0.7pc in the past year, compared with deflation of 0.1pc in June. The figures underline concerns that despite the sharp rebound in a variety of economic indicators, and despite news that France and Germany have both...

There is one overwhelming fact about the world economy that cannot be wished away. Excess capacity in industry is hovering at levels not seen since the Great Depression. Too many steel mills have been built, too many plants making cars, computer chips or solar panels, too many ships, too many houses. They have outstripped the spending power of those supposed to buy the products. This is more or less what happened in the 1920s when electrification and Ford’s assembly line methods lifted output faster than wages. It is a key reason why the Slump proved so intractable, though debt then...

No, I’m not being over-dramatic. It is time to buckle the heck up. The resonant disconnect between reality and the pumping that is going on in the media and among supposed “experts” is at an all time historic, never been here before, Economic Mass Psychosis, HIGH. To Quote John Kenneth Galbraith, “The majority is always wrong.” Right now the majority believe we are exiting the crisis. They are just plain old fashioned WRONG – again. To prove my point, I’m going to show you the week in charts courtesy of the St. Louis Fed. This week, however, I’m issuing a...

The Bank of England will downgrade its growth forecasts and issue a warning this week that the UK economy risks slumping into a debt deflation trap, the Telegraph reported on Monday. The newspaper said BoE Governor Mervyn King will use the Bank's Inflation Report on Wednesday to say the risk of such a slump was one of the main reasons behind the bank's surprise decision last week to extend its quantitative easing programme.

Zero Hedge, in collaboration with David Rosenberg, Chief Economist & Strategist, Gluskin Sheff + Associates, Inc., is pleased to release the attached analysis "The End Of The End Of The Recession." It is our hope that this piece will provide some badly-needed perspective on "the recession is over" debate, a topic that has become as one-sided as it is wrong-headed. Our purposes is to promote rational, informed discourse on the subject and to this end we enthusiastically solicit reader feedback.

One of the most important debates now occurring in the public forum is whether the economy will be hobbled by crippling inflation, hobbled by crippling deflation, or somehow muddle through without much of either. Too much of the debate seems to regard inflation and deflation as things that somehow just occur in an economy, rather than as choices that we, as the participants in the economy, make. While that view of in/deflation is correct in some circumstances, it is not correct for the circumstances we find ourselves in currently. Instead, we need to realize that whether we have inflation or...