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QE from Foreign Central Banks will cause Deflation!

November 4, 2014

Now that our Federal Reserve Bank has stopped QE for the USA, we could be importing ‘deflation’ from countries like Japan and the Eurozone. These Nations are trying to create ‘inflation’ in their areas and this means that imports will be cheaper for Americans. This trend is ‘deflationary’ for the USA. The huge QE (counterfeiting) in Japan means that imports from this Nation will be cheaper for Americans. Our cyber dollar will buy more goods and this means lower prices for many products. This trend of ‘deflation’ should accelerate for Americans in the coming months. Deflation is great for consumers (without debt) but detrimental for all entities which are carrying substantial debt. We have now entered a serious trend which has not occurred seriously since the Great Depression era. Who is aware of what is emerging? Probably not many!

Economist, Gary Shilling, has been predicting deflation for many years. His perception is now becoming a reality! Deflation must happen as our DEBT has reached unsustainable levels!

The big question is what will our Fed do when they become aware of this serious ‘deflationary’ trend. Will our Fed initiate another round of their own QE? Because we live within a debt/credit financial system where borrowing is essential to maintain growth and asset inflation, our Keynesian administrators will not desire this serious ‘deflationary’ trend. I have been predicting ‘deflation’ for some years. I recognized (back in 2008) that our debt system had reached a threshold level which could not continue indefinitely. With the end of American QE and the continuing issues of a slow down for the Eurozone, Japan, China, Germany, and many Latin American nations, we will now witness overall ‘deflation’ for many economies. What is deflation?

America’s National Debt is now some $17.9 trillion. If we add public, state, local debt we get to $78 trillion. If we add all our unfunded liabilities we get to some $175 trillion. If we add derivative liabilities we get to some $900 trillion. At some point we need to deal with this debt! When? The marketplace is saying NOW!

Derivatives are now some $758 trillion (notional value). Defaults in these contracts will implode our entire economy! Deflation can lead to this result in time! See: 

Deflation is what follows ‘disinflation’. America has been experiencing ‘disinflation’ for some years and this reality is now turning into ‘general’ deflation. Deflation is when the ‘general’ overall price level drops for most goods and services within an economy. Deflation reveals that consumers (lack purchasing power) and businesses must retrench and liquidate much of their inventory to pay-off existing debt so they can stay competitive. Deflation starts slowly but builds (over time) as firms must liquidate their inventories to remain solvent. Deflation essentially leads to insolvency in a debt based economy like America. This is where America is going in the coming years. Our DEBT can not be repaid and this means that a Debt Jubilee will be needed at some point down the road!

Debt (under the Keynesian economic model) is our problem! It grows until an unsustainable LEVEL is reached. We are now at that unsustainable level. This means that a period of years will be necessary to clean up our excesses and develop a NEW MODEL!

The economic model which America and the World has been adopting is called Keynesianism. This model is built upon asset appreciation (inflation) and borrowing (debt). The problem with this model is that it is a one-way street. This model leads to excessive/unsustainable DEBT over time. We have now followed this model since our last Great Depression (1934). The model works as long as debt is sustainable and as long as the marketplace recognizes that debt can be repaid. We have now long past the sustainable level (for our debt) and our general overall awareness is now growing that NONE of this debt can be repaid. This means deflation/liquidations/insolvencies/collapse/depression. Now is the time to become AWARE of what has transpired these past 80 years. We now need to start thinking about a NEW MODEL going forward. I am:

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