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
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
S&P 500 Stuck at 2,900, Still No Clear Direction - 17th June 19
Is Boris set to be the next Conservation leader? - 17th June 19
Clock’s Ticking on Your Chance to Profit from the Yield Curve Inversion - 17th June 19
Stock Market Rally Faltering? - 17th June 19
Johnson Vs Gove Tory Leadership Contest Grudge Match Betfair Betting - 17th June 19
Nasdaq Stock Index Prediction System Is Telling Us A Very Different Story - 17th June 19
King Dollar Rides Higher Creating Pressures On Foreign Economies - 17th June 19
Land Rover Discovery Sport Tailgate Not Working Problems Fix (70) - 17th June 19
Stock Market Outlook: is the S&P today just like 2007 or 2016? - 17th June 19

Market Oracle FREE Newsletter

Gold Price Trend Forecast Summer 2019

European Economies in Perpetual State of Shock, What's Scarier Than Deflation?

Economics / Deflation Nov 19, 2014 - 06:24 PM GMT

By: EWI

Economics

As early as 2011, our analysis warned that Europe's deflation was coming -- here's why

For the economies of Europe, the past few months have felt like one long ice-bucket challenge that never ends: A perpetual state of shock induced by the bone-chilling fact that deflation

"...has become a reality in many European countries." (Oct. 24, New York Times)

At last count, eight European nations are now in outright deflation, including:


  • Italy's -0.1% annual inflation, the country's first descent into deflation since 1959
  • Spain's -0.3% annual inflation, the most serious deflation of any larger eurozone economy
  • France's near 0.0% core inflation, the lowest in modern history

And no, in case you were wondering, it's not the warm and fuzzy kind of "good deflation" being touted here in the United States, where the only consequence is lower prices. In Europe, it's the

"...pretty awful kind." "Titanic Europe headed for shipwreck" KIND OF awful (Nov.14, The Telegraph)

So, we ask you: What could possibly be scarier than deflation? How about -- not even being able to foresee it?

Yes, deflation was a surprise to the financial authorities. Says one Oct. 12 financial blog post:

"It seems the entire world is cooling off in ways most political leaders and central bankers never saw coming. Global finance ministers are now up against a beast none have known in their professional lives."

That's what should keep adults like you and me up all night -- the "never-saw-it-coming" part. Just how safe is our future if the people whose job it is to keep the world's economies stable lack the tools to predict one of the most dangerous economic conditions?

This recent lack of foresight jives with what former Federal Reserve chairman Alan "The Maestro" Greenspan said in 2008:

"We can tell a bubble only after it burst."

It also jives with what some big wig at the Organization for Economic Co-operation & Development said in 2012:

"The responsibility of the 'latest' financial crisis, which no one saw coming, should be borne by all of us."

But the fact is -- there was -- and is -- a way to see these deflationary economic sea changes coming.

This chart of the UK Consumer Price Index is a reliable bellwether for inflation in Europe. You can see that price expansion peaked in September 2011 at 5.2%:

At the time, the "D" word was completely off the mainstream radar. Soaring oil, grain, and commodity prices, alongside a stimulus-happy European Central Bank fueled widespread fears of runaway inflation.

One month before the top, Elliott Wave International's August 2011 European Financial Forecast laid the opposing groundwork:

"We maintain our stance, however, that the looming threat is not inflation but deflation. Far from a sense of relief, the Banks' paramount feelings should soon develop into an unrelenting dread."

Here's what made us take a contrarian stance (among many other reasons):

[In the August 2011 issue,] for instance, we showed a chart of eurozone manufacturing production and British GDP growth. Both were falling, not rising, indicating Europe's likely return to economic contraction.

[This] chart is another key piece of deflationary evidence... It shows the relentless downward trajectory of Swiss, German and British 10-year bond yields, which is one of the thorniest problems for those who take the inflationist worldview.

Bond yields aren't just falling: 10-year Swiss, German and British yields collectively dropped to record lows last month. The unrelenting demand for Europe's safest debt is a smoking howitzer that is blowing the inflationists' case to pieces.

-- The European Financial Forecast, Sept. 2011

However, the widespread call for inflation only continued to intensify in the mainstream finance. In fact, in February 2012, when the U.K. producer price inflation came in higher than expected, it prompted this word of advice from economists:

"PPI: Another wake-up call for apoplithorismosphobes, the clinical term for those who fear deflation. We recommend that sufferers 'seek therapy.'" (March 12, Wall Street Journal)

Yet, our July 2012 European Financial Forecast remained committed to its counter claim:

"Our models say that inflation rates will keep failing until they're again measuring the rate of deflation as they last did briefly in 2009."

So, it's now 2014 and deflation in Europe is no longer a specter or a figment of an unbalanced imagination. Here's a comment from the September 2014 European Financial Forecast:

"The central bank's latest deflation-fighting contrivance is a €400 billion package of targeted LTRO loans, which are designed to compel banks to lend to ordinary business owners... The ECB has slashed its main refinancing rate to 0.15% and now charges for banks' overnight deposits. The result? Shown below, Europe's largest economy, Germany, just contracted 0.2%; French economic output has ground to a halt; and Italy just entered its third recession since 2008."

Now that deflation in Europe is a reality, the question is -- will it get better? Is this just a temporary economic condition that will be soon replaced with another one -- the condition that economists are much more familiar with, inflation?

We don't think deflation will surrender quite so easily. Want to learn more about deflation before it could potentially affect your investments?

Today, we invite you to read a free report from Elliott Wave International titled, What You Need to Know About Protecting Yourself from Deflation. This 10-page report will help you understand how you can better prepare yourself for its devastating effects.

Just follow this link to get your free report -- and start reading now!


This article was syndicated by Elliott Wave International and was originally published under the headline What's Scarier Than DE-flation?. EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

About the Publisher, Elliott Wave International
Founded in 1979 by Robert R. Prechter Jr., Elliott Wave International (EWI) is the world's largest market forecasting firm. Its staff of full-time analysts provides 24-hour-a-day market analysis to institutional and private investors around the world.


© 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