By Elliott Wave International
Here’s What’s Wrong with the ‘Good’ Deflation Argument
Editor’s note: This article was adapted, with permission, from the February issue of The Elliott Wave Financial Forecast, a publication of Elliott Wave International, the world’s largest market forecasting firm. All data is as of Jan. 30, 2015. Click here to read the complete version of this article, including specific near-term forecasts, 100% free.
Deflation is a decline in the supply of money and credit relative to goods and services in an economy.
History shows us that the most important deflationary episodes are invariably accompanied by comparable declines in equity, factory and retail prices.
Continue reading The ‘Good’ Deflation Argument
We have deflation of footballs and deflation of my lungs after round 1 out there in the driveway. Back in and taking a break, I always find Jeff Gundlach an interesting listen. Maybe you will too… Pardon the ad if one pops up in the 1st 30 seconds.
Guest Post by Michael Ashton
Money: How Much Deflation is Enough?
Once again, we see that the cure for all of the world’s ills is quantitative easing. Since there is apparently no downside to QE, it is a shame that we didn’t figure this out earlier. The S&P could have been at 200,000, rather than just 2,000, if only governments and central banks had figured out a century ago that running large deficits, combined with having a central bank purchase large amounts of that debt in the open market, was the key to rallying assets without limit.
That paragraph is obviously tongue-in-cheek, but on a narrow time-scale it really looks like it is true. The Fed pursued quantitative easing with no yet-obvious downside, and stocks blasted off to heights rarely seen before; the Bank of Japan’s QE has added 94% to the Nikkei in the slightly more than two years since Abe was elected; and today’s announcement by the ECB of a full-scale QE program boosted share values by 1-2% from Europe to the United States.
Continue reading Money, Commodities, Balls and How Much Deflation is Enough?
Guest Post by Elliott Wave International
Debt and Deflation: Three Financial Forecasts
There’s more to deflation than falling prices
Editor’s note: You’ll find the text version of the story below the video. Join Elliott Wave International’s free State of the U.S. Markets online conference to get prepared for the major moves in U.S. stocks, commodities, gold, USD and more for 2015 and beyond. Register now and get instant access to a free video presentation from market legend Robert Prechter and regular email updates with insights from our most recent publications and presentations from our key analysts.
Inflation ruled from 1933 to 2008.
Yet in the just-published Elliott Wave Theorist, Bob Prechter’s headline says, “Deflation is Starting to Win.”
Take a look at this chart from The Telegraph:
Continue reading Debt and Deflation: 3 Financial Forecasts
Guest Post by David Stockman & Stealthflation
The Deflation Calamity Howlers Are Dead Wrong—-In Europe And Everywhere Else
The calamity howlers of deflation are out in force this morning owing to an absolute economic non sequitur. Namely, that year-on-year consumer prices in the EU came in at negative 0.2% in December, implying that ECB printing presses need to go into immediate overdrive.
Well, of course the CPI has momentarily weakened. Crude oil has experienced a monumental plunge of more than 50% since mid-2014. That has temporarily dragged down the euro zone’s reported CPI and the math isn’t all that complex. During the last 12 months, euro zone energy prices have fallen by 6.3%, and everything else is still 0.6% higher than a year ago.
So what’s the emergency? This is the very same CPI blip that occurred when oil collapsed in the second half of 2008. As is evident below, that episode did not generate some cascading plunge into economic darkness. In fact, the Eurozone CPI was back running above 2.5% in no time.
The truth of the matter is that the EU-19 is in clover because it’s consumers get a big break; and, on the other side of the economic equation, it produces almost no oil. Europe’s production is mainly in the UK and Norway and they have their own currencies. Accordingly, the ECB should be putting its printing presses on an extended sabbatical and declaring victory on the achievement of its “price stability” objective.
Continue reading Deflation Calamity Howlers Are Dead Wrong
Guest Post by Michael Ashton
Today’s column is a brief one, as I need to post a correction. Not a correction to my stuff, mind you, but to others.
Pictures like the below have been circulating now for a couple of weeks. This is a chart of the 2-year inflation “breakeven” on Bloomberg, illustrating how a “deflation warning” is sounding as they go negative.
Continue reading Call Off the Deflation Warning
- Fill’er Up –Market Anthropology [biiwii comment: a few days late but interesting viewpoint on the post-2011 disinflationary phase]
- 5 Themes for 2015 –SeekingAlpha [biiwii comment: this SA post disputes MA’s view; what makes a market and all…]
 December ISM just out, details here –NFTRH.com
and… What Happens After a Big Down Day Between Christmas & New Years –QuantEdges