Welcome to the Inflation Data Blog
With the Web 2.0 revolution everyone enjoys responding to articles and being able to share good articles with friends and other sites. But we have been a bit behind the curve because of the way our databases are hosted on InflationData.com so adding a blog has been impossible… up until now!
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Hope You Enjoy the New Site!
Tim McMahon, editor
Uncle Scam
The latest data on global gold trends, Q2 2010, just popped into my email box from the World Gold Council.
The bad news is that the higher nominal price of gold has caused a 5% decrease in jewelry sales over the prior year.
If you’re thinking “Hey, that’s not that bad!”, you’d be right. On this date last year, gold closed at $950… which is $286 below where it trades as I write. In other words, a 30% rise in price has resulted in a decrease of just 5% in jewelry sales.
And even that number is skewed, because the currency value of the gold purchased is up – way up. For example, India – the 800-pound gorilla in the global gold jewelry market – saw total gold jewelry sales fall only by 2%, but in local currency terms, there was a 20% increase in the nominal value of the gold trading hands. China, which only relatively recently reauthorized private gold purchases, saw a 5% increase in jewelry demand, but that translated into a 35% increase in local currency terms.
So, that’s the bad news. Read the rest of this entry »
Which is Stronger- Inflation or Deflation?
By Tim McMahon, editor
Why the Printing Press is No Match for Deflationary Forces-
A mere two years ago (although it seems like a lifetime) in August of 2008, inflation was roaring in at 5.37% and the world was talking about hyperinflation. But then along came the housing crash which started the domino effect of deflationary forces. Housing prices, stock prices, asset prices all began falling; triggering margin calls and more liquidation until even Gold (the only investment that is not simultaneously a liability) began to feel the deflationary pressure. By July 2009 a mere 11 months later, everyone was no longer afraid of the inflation monster, but now they were fearing deflation. At that point the inflation rate was negative (deflationary) at -2.10%, a rate of deflation we hadn’t seen since the 1950′s.
The government was so afraid of the “asset deflation domino effect” that they opened the liquidity spiggot full blast and created a Trillion dollars out of thin air. This temporarily reignited hyperinflationary fears. But as I said in my article Velocity of Money and Money Multiplier- Why Deflation is Possible as the velocity of money falls, money isn’t turning over as fast and it stops multiplying. So even with the government spiggots wide open the money supply can still contract. And so even though the inflation rate initially rebounded to 2.72% by December 2009, thereafter it began to slowly drift lower again. Velocity of money and the money multiplier were doing their work slowly eating away at the inflation rate, from 2.14% in February, to 2.02% in May, to 1.05% in June.
So now investors are beginning to see the picture I painted back in April in my “Velocity of Money and Money Multiplier- Why Deflation is Possible article” and investors don’t like what they’re seeing.
So what is keeping the inflation monster at bay?
20 Questions with the World’s Leading Deflationist
20 Questions with the World’s Leading — Perhaps Only True — Deflationist, Robert Prechter
Robert Prechter, the world’s leading proponent of the deflationary scenario, answers tough questions from noted financial commentator Jim Puplava. Anyone looking to invest in today’s environment should read this revealing new 20-page report.
Consider these recent forecasts:
- In 2005, Prechter warned readers of an imminent top in real estate.
- In October 2007, Prechter warned that stocks and commodities were historically overvalued and due for an immediate crash.
In 2008, Prechter maintained that the U.S. dollar would rally throughout the most volatile market environment since the Great Depression.
- In February 2009, Prechter told readers to end their short bets and prepare themselves for a “sharp and scary” bear market rally.
- In April 2010, Prechter wrote, “we can project a top … between April 16 and May 7, 2010.”
It’s amazing enough that all of these forecasts were correct; but the fact that all of them defied mainstream logic makes Prechter’s forecasts truly extraordinary. Virtually no one saw these moves coming. Prechter did, and he was vocal about each one. Now, no forecaster is always right, but someone with the record above deserves a closer look, which is why Jim Puplava caught up with Prechter to hear what he’s saying now.
Read this explosive new interview FREE! Simply create your FREE Club EWI profile to access this report.
Already a Club EWI member? Log in to download your report.
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Deflation: First Step, Understand It
There is still time to prepare if deflation is indeed in our future.
“Fed’s Bullard Raises Specter of Japanese-Style Deflation,” read a July 29 Washington Post headline.
When the St. Louis Fed Chief speaks, people listen. Now that deflation — something that EWI’s president Robert Prechter has been warning about for several years — is making mainstream news headlines, is it too late to prepare?
It’s not too late.
There are still steps you can take if deflation is indeed in our future. The first step is to understand what it is. So we’ve put together a special, free, 60-page Club EWI resource, “The Guide to Understanding Deflation: Robert Prechter’s most important warnings about deflation.” Enjoy this quick excerpt. (For details on how to read this important report free, look below.) Read the rest of this entry »
If Deflation Wins, What Will Gold Stocks Do?
By Jeff Clark, Senior Editor, Casey’s Gold & Resource Report
The talk of a possible double dip is now common banter on TV investment programs. And indeed, deflationary forces seem to have the stronger grip right now than inflationary ones. So if deflation is the next reality we have to face, what happens to our favorite stock investments?
There’s lots of data about what gold does during periods of high inflation, but less so with deflation, partly because we don’t see a true deflation all that often. But of course we’ve got the biggie we can look at, and the seriousness of the Great Depression can give us a big clue as to how gold stocks behave in a true deflationary environment.
First, we know what happened to the stock market in 1929, and in that initial shock, gold stocks crashed too. A rally ensued in most equities until the following April, including gold stocks. Then the Dow took a one-way elevator ride down for the next two and a half years.
What did gold stocks do? Read the rest of this entry »
What is the Ultimate Status Symbol in a Deflationary Depression?
Deflationary Depression: Ultimate Status Symbol
The Biggest House? No. The Most Expensive Car? Try Again.
By Robert Jay
Ostentatious display defined the “Gilded Age” in the latter part of the 19th century. Most of the upper class in that period believed that if you had a big bank account, you should make sure everyone knew it. A century later — during the bull market of the 1980s-1990s — “McMansions” with BMWs in the garage became more common. Pulling out the plastic and enjoying instant gratification became pervasive.
In most decades of the past century, families had to save for big ticket items, perhaps even save all year to ensure holiday presents under the tree. To take the whole family out to eat was a special treat. “We are at a point where we have to have fiscal discipline and maybe go back to the days where you saved up to buy a washing machine, you saved up three to four years to buy a car. We will probably move in that direction as a nation.” Vanguard founder John Bogle (June 22, TheStreet.com interview) What kind of financial era are we heading into now? Will it be similar to what followed this?
The Effects of Fiscal Stimulus are Wearing Thin
The following is an excerpt from Casey’s Daily Dispatch… an ezine with thought provoking commentary that I thought you might find interesting. ~ Tim McMahon, Editor
Words from the Wise
By David Galland,
I would like to share just a few snippets I think you’ll benefit from, starting with the latest posting from Ambrose Evans-Pritchard, which you can read in full here.
Here’s an excerpt:
Today’s release on manufacturing activity by the Richmond Fed is pretty ghastly, as you would expect given that the effects of fiscal stimulus are now wearing off at accelerating pace – before the happy handover to the private sector is safely consummated – and given that the structural East-West imbalances that lay behind the global crisis are getting worse again.
Deflation: The Black Swan Has Been Spotted
By Nico Isaac
- Oct. 20, 2008: “Central banks of the world know how to stop deflation. You just print enough money.” (Reuters)
- Jan. 19, 2009: “US Deflation Unlikely. The tremendous stimulus from the US administration… should prevent the recession from dragging on long enough for deflation to get a toe-hold.” (The Globe & Mail)
- March 10, 2009: “Fed Sees No Signs Of Deflation.” (Daily Finance)
- Feb. 2, 2010: “There was some downward pressure exerted by the housing and auto companies that probably won’t persist into the next few months. We don’t see those prices declining on a sustained basis.” (USA Today)
Flash ahead to today and there’s no denying the trail of molted black feathers leading all the way to … Read More
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Popular Free Resources
Quadrillion Dollar Debt: ‘Day of Reckoning’ Looms
What Will Happen as $1,000,000,000,000,000 in Global Debt Winds Down?
By Elliott Wave International
The biggest balloon in the world is deflating.
This balloon had been inflated with a quadrillion (1015) dollars, which is to say: This balloon was filled not with air but with debt from around the globe.
What will happen as this global debt winds down? In two words: Deflationary Depression — the likes of which could be unprecedented in history.
A thousand trillion in debt can’t be wished away or swept under the rug. No one can “forgive” the debt. The consequences of unwinding this debt could be as massive as the dollar figure itself. Read the rest of this entry »
