Best of the Week
Most Popular
1. US Housing Market House Prices Bull Market Trend Current State - Nadeem_Walayat
2.Gold and Silver End of Week Technical, CoT and Fundamental Status - Gary_Tanashian
3.Stock Market Dow Trend Forecast - April Update - Nadeem_Walayat
4.When Will the Stock Market’s Rally Stop? - Troy_Bombardia
5.Russia and China Intend to Drain the West of Its Gold - MoneyMetals
6.BAIDU (BIDU) - Top 10 Artificial Intelligence Stocks Investing To Profit from AI Mega-trend - Nadeem_Walayat
7.Stop Feeding the Chinese Empire - ‘Belt and Road’ Trojan Horse - Richard_Mills
8.Stock Market US China Trade War Panic! Trend Forecast May 2019 Update - Nadeem_Walayat
9.US China Trade Impasse Threatens US Lithium, Rare Earth Imports - Richard_Mills
10.How to Invest in AI Stocks to Profit from the Machine Intelligence Mega-trend - Nadeem_Walayat
Last 7 days
Silver Short-Term Trend Analysis - 26th June 19
Iran and the Dying Days Of the US Empire - 26th June 19
Why a Saturated Online Gaming Market Spells Good News for Gamblers - 26th June 19
Natural Gas Sets Up Bottom Pattern - 26th June 19
Has Gold Price Broken Out Or Not? Technicals And Fundamentals - 26th June 19
Stocks and XAU Gold Miners Next Bull and Bear Markets are Now Set Up - 26th June 19
Gold Price Trend Forcast to End September 2019 - Video - 25th June 19
Today’s Pets.com and NINJA Loan Economy - 25th June 19
Testing the Fed’s Narrative with the Fed’s Data: QT Edition - 25th June 19
What "Pro Traders" use to Find Profitable Trades - eBook - 25th June 19
GDX Gold Stocks ETF - 25th June 19
What Does Facebook’s LIBRA New Crytocurrency Really Offer? - 25th June 19
Why Bond Investors MUST Be Paying Attention to Puerto Rico - 25th June 19
The Next Great Depression in the Making - 25th June 19
The Bad News About Record-Low Unemployment - 24th June 19
Stock Market New High, but…! - 24th June 19
Formula for when the Great Stock Market Rally Ends - 24th June 19
How To Time Market Tops and Bottoms - 24th June 19
5 basic tips to help mitigate the vulnerability inherent in email communications - 24th June 19
Will Google AI Kill Us? Man vs Machine Intelligence - 24th June 19
Why are Central Banks Buying Gold and Dumping Dollars? - 23rd June 19
Financial Sector Paints A Clear Picture For Stock Market Trading Profits - 23rd June 19
What You Should Look While Choosing Online Casino - 23rd June 19
INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - 22nd June 19
Here’s Why You Should Drive a Piece of Crap Car - 22nd June 19
How Do Stock Prices React to Fed Interest Rate Cuts? - 22nd June 19
Gold Bull Market Breaking Out! - 21st June 19
Post-FOMC Commentary: Delusions of Grandeur - 21st June 19
Gold Scores Gains as Draghi and Powel Grow Concerned - 21st June 19
Potential Upside Targets for Gold Stocks - 21st June 19
Gold Price Trend Forcast to End September 2019 - 21st June 19
The Gold (and Silver) Volcano Is Ready to Erupt - 21st June 19
Fed Leaves Rates Unchanged – Gold & Stocks Rally/Dollar Falls - 21st June 19
Silver Medium-Term Trend Analysis - 20th June 19
Gold Mining Stocks Waiting on This Chart - 20th June 19
A Key Gold Bull Market Signal - 20th June 19
Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - 20th June 19
Investing in APPLE (AAPL) to Profit From AI Machine Learning Stocks - 20th June 19
Small Cap Stocks May Lead A Market Rally - 20th June 19 -
Interest Rates Square Minus Zero - 20th June 19
Advice for Financing a Luxury Vehicle - 20th June 19
Stock Market Final Blow Off Top Just Hit… Next Week Comes the FIREWORKS - 20th June 19
US Dollar Rallies Off Support But Is This A Top Or Bottom? - 19th June 19
Most Income Investors Are Picking Up Nickels in Front of a Steamroller - 19th June 19
Is the Stock Market’s Volatility About to Spike? - 19th June 19
Facebook's Libra Crypto currency vs Bitcoin: Five Key Differences - 19th June 19
Fed May Trigger Wild Swing In Stock Index and Precious Metals - 19th June 19
How Long Do Land Rover Discovery Sport Brake Pads Last? - 19th June 19
Gold Golden 'Moment of Truth' Is Upon Us: $1,400-Plus or Not? - 18th June 19
Exceptional Times for Gold Warrant Special Attention - 18th June 19
The Stock Market Has Gone Nowhere and Volume is Low. What’s Next - 18th June 19
Silver Long-Term Trend Analysis - 18th June 19
IBM - Watson Deep Learning - AI Stocks Investing - Video - 18th June 19
Investors are Confident, Bullish and Buying Stocks, but… - 18th June 19
Gold and Silver Reversals – Impossible Not to Notice - 18th June 19

Market Oracle FREE Newsletter

Gold Price Trend Forecast Summer 2019

Economic Downward Deflationary Spiral: The Next Big Wave of Deflation is Upon Us

Economics / Deflation Jul 09, 2010 - 11:10 AM GMT

By: Global_Research

Economics

Best Financial Markets Analysis ArticleMichael Schmidt writes: It looks like the next big wave of deflation is upon us. Looking at some key fundamentals, we see the labor market is again shredding jobs (652,000 in June), the money supply is contracting at levels not seen since the Great Depression and the US Federal Governments finances are in complete disaster.


We stand on unbelievably shaky ground right now and this time around there isn’t any room for another massive fiscal stimulus from a soon to be impotent Federal Reserve. It appears that a good amount of mainstream economists and financial journalists are finally recognizing that the worst may still be to come. This comes from Ambrose Evans-Pritchard of the Telegraph earlier this week, “Let us be honest. The US is still trapped in depression a full 18 months into zero interest rates, quantitative easing (QE), and fiscal stimulus that has pushed the budget deficit above 10pc of GDP”.

As we watch the various stock indexes begin their slow and inevitable decline, it appears that no amount of monetary stimulus or meddling from the Fed can stop the next leg down. Liquidity is rapidly fleeing the financial system. Again, as Pritchard notes, money market funds declined 37% in the month of May, something that has never happened before.  Although the Federal Reserve no longer publishes the total money supply figure (M3), many well respected economists including John Williams of Shadowstats, reconfigure the data based on previously used computation methods. For the three month period ending in April, the money supply in the US (M3) fell at what amounted to a 9.6% annually, something not seen since the Great Depression. As the money dries up from the stimulus driven “economic recovery” of 2009, it appears 2010 will be marred by another round of credit contraction.

What’s worse is that the US Government may be unable to respond in a similar manner as in 2008, mainly because our government’s finances are in complete disarray. The sad truth is that the US Treasury needs continued support from foreign central banks, much more than they need us. With the Federal Government running a $1.8 trillion dollar deficit this year, and with large deficits for many years to come, we need international investors and foreign central banks to continue their appetite for Treasury bonds. It appears that they may have finally had their fill. Besides the obvious economic disincentive of holding a depreciating asset, these investors now have less money to pump back into the coffers of the US Treasury. China recently announced they are removing the artificial currency peg to the US dollar, and will allow the yuan to appreciate gradually against an already struggling greenback. This again from Ambrose Evans-Pritchard,

 “ When China allowed the yuan to rise in July 2005 the move triggered a slide in US Treasury bonds, with knock-on effects on US mortgage and corporate debt … Yuan revaluation is likely to dampen China's export growth and slow the pace of reserve accumulation, reducing the need to recycle money into foreign bonds.”

With economic activity drastically lower over the past 3 years, it appears foreign central banks are unable to cushion our ever increasing deficit.

Even the international political situation is much different as well. With the recent calls from the UN for a new international reserve currency to replace the dollar, the situation has never been more tenuous for the US financial leadership.  From the UN’s World Economic and Social Survey 2010:Retooling Global Development, it states  “A new global reserve system could be created, one that no longer relies on the United States dollar as the single major reserve currency… The dollar has proved not to be a stable store of value, which is a requisite for a stable reserve currency.” Given that the IMF already has an international currency, SDR (Special Drawing Rights), the writing may be on the wall for the US dollar. It appears sooner rather than later, the dollar will be ditched in favor of another fiat currency, this time one purely international in scale.

When we factor in all of these recent developments, we see that there is only one place to go for the US economy. All the cheerful talk of recovery over the past year is slowly slipping into a more somber and realistic tone. With the apparent correction taking place in the stock market, there doesn’t appear to be many places to hide if you are an investor. As it always has been, it appears gold and silver are the only legitimate places to park your money as we prepare for the next leg down.

Michael Schmidt was a financial representative at Fidelity Investments where he traded securities and helped customers with their investment and retirement accounts. You can read more of his articles at http://www.examiner.com/x-25578-Cincinnati-Economy-Examiner or reach him at Michael.schmidt1985@yahoo.com.

Global Research Articles by Michael Schmidt

© Copyright Michael Schmidt, Global Research, 2010

Disclaimer: The views expressed in this article are the sole responsibility of the author and do not necessarily reflect those of the Centre for Research on Globalization. The contents of this article are of sole responsibility of the author(s). The Centre for Research on Globalization will not be responsible or liable for any inaccurate or incorrect statements contained in this article.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules