Do Most Economic Observers Underestimate the Threat of Deflation?

Bank of America Merrill Lynch has just issued a sobering assessment about the U.S. and European economies: Despite the ongoing economic recovery, we believe there is a significant risk of either a continued drop in inflation or outright deflation in one or several advanced economies over the next several years. In addition, the financial giant [...]

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Despite the Fed’s leverage and its attempt to inflate throughout the economy, the deflationary pressures in the U.S. are overwhelming. Watch this six-minute clip from Steve Hochberg’s presentation at the Orlando Money Show.

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Leading deflationist Albert Edwards is quoted in this March 12 MarketWatch article titled, “Are You Ready for Deflation?” The article explains how U.S. prices are tracking eerily with 1990s Japan. Edwards comments on the market-based PCE price index as a deflation indicator—the only index that is based solely on actual prices paid in the market: The [...]

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Is the market rally since the low of November 16th signaling better times ahead? We don’t think so. It seems to us that Wall Street is automatically assuming that the fiscal cliff will be settled by year-end, that the economy will subsequently recover at a stronger pace and that the market is significantly undervalued. We [...]

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Inflation in the U.S. has historically been a wartime phenomenon, including not only shooting wars but also the Cold War and the War on Poverty.  That’s when the federal government vastly overspends its income on top of a robust private economy—obviously not the case today when government stimulus isn’t even offsetting private sector weakness.  Deflation [...]

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Until 1933, a dollar was defined as a certain amount of gold. Even the Fed’s notes were convertible into gold. Money was stable. From 1933 to 1971, the dollar was still at least partially an IOU for gold, because foreigners could collect gold—price-fixed by the government at $35 an ounce—from the Treasury in exchange for [...]

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