Biggest Sea Change of Our Lifetime! --- From inflation to deflation.

[cobra de capell]

Gala Issue: Biggest Sea Change of Our Lifetime!
by Martin D. Weiss, Ph.D. 12-22-08

The Fed, the Treasury and all major governments on the planet are throwing the kitchen sink at this debt crisis.

But their efforts are being overwhelmed by a monumental sea change — the shift from rising prices to falling prices, from booming asset values to crashing asset values, from wealth creation to wealth destruction, from inflation to deflation.

For my entire lifetime, and probably yours as well, we have been living with inflation — sometimes tame, sometimes rampant — but consistently eroding the purchasing power of our dollar.

Inflation pervaded every money decision we made or thought about making, every retirement plan or business model. Inflation was factored into our leases, our employment contracts, our budgets, our investment programs.

Now, all of that is changing; and it’s doing so dramatically! Suddenly, the polar opposite of inflation is taking hold in America: Deflation!

Suddenly, prices are plummeting — not just for real estate, but also for automobiles, appliances, clothing and gasoline.

From peaks reached just a few months ago to the latest bottoms, the price of oil has plunged 73% … copper has fallen 66% … lead and nickel are down 73% … platinum is down 66% … and wheat is off 64%.

Even the government’s slow-to-change, lagging index of inflation — the CPI — has caved in to deflation, falling by the most since the government first introduced the index in 1946.

These are not numbers that denote less inflation. They are hard evidence of outright deflation!

Suddenly, prices are plummeting — not just for real estate, but also for automobiles, appliances, clothing and gasoline.

From peaks reached just a few months ago to the latest bottoms, the price of oil has plunged 73% … copper has fallen 66% … lead and nickel are down 73% … platinum is down 66% … and wheat is off 64%.

Even the government’s slow-to-change, lagging index of inflation — the CPI — has caved in to deflation, falling by the most since the government first introduced the index in 1946.

These are not numbers that denote less inflation. They are hard evidence of outright deflation!

This is crucial for you: If you continue investing as you did in inflationary times, you risk losing almost everything. However, if you acknowledge this historic shift and make the right moves now, you’ll have the opportunity to build substantial wealth.

Snip........http://www.moneyandmarkets.com/gala-...fetime-3-28912
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Hmmmmm........sounds logical

Link includes......
Deflation Survival Briefing
with Martin D. Weiss and Jack Crooks
(Edited Transcript)
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One part of the transcript...

Jack: People think that since home values have already fallen so far, they must be near a bottom.

Martin:
I don’t agree with that view. Most of the price declines we’ve seen so far merely represent a recognition that the peak prices of the mid-2000s were a fantasy built upon “Frankenstein Financing” — wildly speculative credit terms such as option ARMs and liar loans. The hard-core declines in housing, driven by basic things like recession and unemployment, are just now getting under way.

Jack: How much further do you see home prices falling?

Martin:
My personal opinion is that that over half of the declines are still ahead. That applies not only to housing, but also to commercial properties; not only to real estate, but also to stocks and other assets. Consumer prices just began to fall in October. Outright contractions in the economy are just now getting under way. Deflation is still in its early stages. The wealth destruction has a long way to go.
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Here's an important part...

In reality, America’s First Great Depression wasn’t caused by what the government failed to do to stop it. Rather, it was largely caused by all the wild things the government did do to create the superboom in the Roaring ’20s that preceded it. They dished out money to banks like candy. They let banks loan money to brokers without restraint. And they encouraged brokers to hand it off to stock market speculators with 10% margin.

But if you want to see what happens when a government intervenes aggressively after a bust, just look at Japan since 1990. Japan lowered interest rates to zero, just like the Fed is doing today. Japan bailed out banks, brokerage firms and insurance companies, much like the Fed is doing here. Japan embarked on massive public works projects, much like President-elect Obama is proposing now.

But it did not end the deflation. And it did not prevent their stock market from making brand-new lows this year.

All it did was prolong the agony — now 18 years and counting.
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Yes, doom and gloom - but what will bring America out of this huge hole?