Why This Former CEO Says "Deflation is the Force to Watch"

Yes, U.S. stocks have mainly been in an uptrend since March 2009, and the economy has grown since the depths of the Great Recession.

Even so, inflation has been relatively subdued.

However, in early 2018, an increasing number of economic observers say they're worried about inflation as they look ahead. But, are these inflation fears misplaced? EWI believes the answer is "yes."

Read this excerpt from Robert Prechter's third edition of Conquer the Crash:

The next big monetary event will not be more inflation but deflation, as the huge quantity of accounting-unit indebtedness, built on a foundation of accounting-unit indebtedness, becomes unpayable and contracts.

Now, a former CEO of Quizlet, who is a commentator for Fortune magazine, shares his own views about deflation in a Feb. 8, 2018 article titled "Inflation Shook the Markets This Week—But Deflation Is the Force to Watch." Here's an excerpt:

Investors got spooked this week by the specter of rising interest rates and inflation, and what they might mean for the global economy.

But they should look just as hard at deflation, which in recent years has been neutralizing inflation's impact on wages and prices—with the notable exception of asset prices.

I believe deflation has become structural and is here to stay, no matter what interest rates do. Recent innovations like ecommerce and fracking have strengthened deflation's grip on prices, people, and jobs. Everything that can be produced with technology just keeps getting cheaper and cheaper.

How did this happen? In the mid-1990s, consumer prices started falling and never looked back. Cheap overseas labor, global trade agreements, containerization, and the emergence of big box stores and mass-discount retailers all drove this trend. By the 2000s, Internet shopping had kicked in, making it easy to value shop, and challenging brand loyalty. …

But deflation's biggest impact is yet to come. Eighty percent of jobs in the U.S. are in services, and almost all are on a path to getting deflated and commoditized. U.S. wages have been deflating for 20 years to the surprise of most economists, especially given the recently booming economy. …

Deflation's final frontiers are health care and education, which have been insulated because consumers don't pay their costs directly (employers and the government do). But now that that's changing too, there's nowhere to hide.

You can read the entire article by following the link below:

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