If you are looking for inflation you are looking in the wrong direction.

The world is going through deflation. Japan is mired in it, Europe has gone negative. Obama even admitted that inflation is negative this year. Negative inflation is deflation. People are scared and buying metals but the bond market (the grandaddy of them all) isn’t buying it. Benanke wil soon have to make a choice, defend the dollar and let the markets fall or keep up the charade and let the world show their disapproval by not buying US Treasuries (not lend us any more money). Either way won’t really matter because the credit (formally used synonomously with money) is contracting faster than he can print new money. Any doubt? Look at a chart of the M2 money supply. Prices are going down, real estate is going down, assets have fallen in value. Have you tried to sell your car, a painting, or anything else lately.

People are starting to save again, buying less on credit, and less dollars are circulating in the system. Talk inflation all you want but worldwide monetary system is contracting. In Belgium farmers are dumping milk in the streets because it costs more to produce it than they can sell it for. Sound familiar? Look into the depression years. Can you go anywhere anymore without seeing a sale on? They don’t put on sales unless they can’t sell their products. Look at the earnings of just about everyone. Increased sales BUT decreased revenue. Their margins are getting crushed. They aren’t getting full price for their products. As profit goes down layoffs and decreased wages are soon to follow. America, wake up and smell the lattes. The more prices come down, the more valuable you dollars will become for those of you who are debt free. Buying on credit? As deflation kicks in hard, those payments will get worse and worse as they won’t fall when your wages and asset values do, they will be like an anchor around your neck. That’s my take on the situation. Only time will tell if I am right or not.

David Drochak

Related Posts:

• A Must-Read: We are now on the cusp of a very serious money supply deflation.
• If you truely don’t believe that inflation is purely a money supply phenomenon…..answer yourself this one simple question:
• New money does not make the economy good. New money is a fraud, created out of nothing.
• CIT bailout is just putting your finger in the dam.
• Keynesianism means printing money* and spending it will lift the economy out of depression.

Leave a comment