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Disinflation is leading to DEFLATION! Watch the markets!

October 12, 2014

The following countries are now experiencing ‘disinflation’: Sweden, Switzerland, Czech Republic, New Zealand, China, Spain, Italy, Hungary, South Africa, South Korea, India, and Malaysia. Also, the 18 Nation Eurozone (as a combined entity) is viewed as seriously in disinflation. Disinflation means that the rate of inflation is declining. Deflation means that the ‘general’ overall price level is declining for all goods/services. Aggregate demand is waning during disinflation, the velocity of money is not growing, borrowing by many business entities is waning, consumer income is stagnant, and overall unemployment (U-6) is near 23%. Also, some 48 million Americans are on Food Stamps (with limited income to spend). Deflation is now emerging and I expect this trend to continue into 2015 and beyond!

This lady is fearful of a coming deflation! Why? Her name is Christine Lagarde of the IMF!

The great BEAR market of all history is emerging rapidly! Now is the time to prepare!

Inflation means that the overall money supply (available to consumers and businesses) is increasing faster than goods and services. This creates a situation where the overall ‘price’ level increases. Keynesian economics is based on continuing inflation at 2% or greater continually. Inflation is needed to service all the debt created from this economic model. When deflation occurs, debt is difficult to service and general ‘values’ tend to decline. Keynesian economics can not accept real deflation for an extended time period. Deflation exposes this economic model as a sham and a fantasy. As ‘values’ decline people become aware that ‘value’ is imaginary and that our cyber currency is an illusion and a hoax.

Gold and Silver coins could work as viable units…as demand will likely increase during ‘deflation’!

I don’t think that any type of hyper-inflation is on the horizon. Hyper-inflation means that money (currency units) must be made available to the consumer economy (some 70% of the overall economy). Consumers create demand. Today, consumer incomes are mostly stagnant and credit demand is not growing sufficiently. Real estate is now growing in supply, however, demand for the units being created is not developing. In Tucson we experience huge developments where less than 10% of the units have been sold. Demand just has not developed and now mortgage applications are also declining. All these factors suggest that disinflation will develop into DEFLATION at some point.

The Nation to watch in 2015 is China. China is now slowing rapidly and their real estate bubble is starting to collapse. The Eurozone is also in serious trouble as aggregate demand is not growing. Germany is starting to slow and what happens in Germany determines what the entire Eurozone will experience. The other factor which is emerging now is a slow down in the American economy. This slowdown is likely to continue as our Central Bank is tapering their QE dollars. QE created the stock market bubble and also a false ‘wealth’ effect in real estate. We now witness the confidence in both these markets waning rapidly. Personally, I expect both the stock and real estate markets to collapse/crash in 2015. The start is NOW!

Keynesian bubbles continued after 2008 financial crisis. These bubbles are now ready to pop!

This warning was in 2013. Today, the deflationary WAVE has become stronger!

A wise person would recognize what is now emerging and prepare for serious change in our markets. Those who grow their own food and store items which can be bartered should have a good chance of surviving the coming deflationary collapse. Also, those who own physical silver coins and gold coins should be able to exchange these coins for the cyber currencies which survive..and thus continue their lifestyle. Keep in mind that all our cyber currencies are non-physical (imaginary) units. These currencies ‘vanish’ during a period of ‘value’ destruction. What is the exchange price for your house if its ‘value’ declines below your mortgage? What is the price of a share of your stock when the stock market collapses and your 401K account declines? Deflation is a serious event! I think this is coming with a vengeance in the very near future! Prepare! I am:

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