The Deflation Effects on the U.S. and Global Economy

Here at The Deflation Times our purpose is to inform the public that being ready is the best antidote to a depressionary deflation which is riding in on a continued contracting economy.

The contracting economy is the most visible change in the current transformation of social mood (from spending to saving... from inflation to deflation) and fiscal conservatism is driving it.

Take for instance bottled water. Budget-conscious consumers are now asking why pay for bottled water when tap water is (practically) free?

Another example is the richest universities in the country, which are not immune to the contracting economy. Harvard's Endowment has dropped sharply, by nearly 30 percent, and we add so has Columbia's Investment Fund, by 16.1 percent, and Yale University's endowment fund, which shrank a more-than-expected 30 percent.

As Bloomberg has reported, economist are now nearly unanimous that the 'recession' is over. But exports and imports, a critically important part of the U.S. economy, continue to lag. Clearly, there is no sign of a rising demand for shipping services as reflected in the Baltic Dry index of freight rates, which is down 10% since August. Off the coast of Singapore "the biggest and most secretive gathering of ships in maritime history lies at anchor east of Singapore. Never before photographed, it is bigger than the U.S. and British navies combined but has no crew, no cargo and no destination - and is why your Christmas stocking may be on the light side this year."

The bad-news bears continue with new unemployment data that shows, even if the economic recovery is around the corner, that it will take many years for labor market to recover.

But fiscal conservatism will continue, to the point where Federal Reserve Chairman Ben Bernanke's claim that the worst recession since the 1930s is probably over" will come back to bite him.

And continued policies such as financial institutions (backed by The Federal Reserve) snapping up securities backed by Ginnie Mae are like putting out the fire with gasoline. Will banks ever learn?

So what if the economy will not recover? "This day -- September 15, 2009 -- marks the one-year anniversary of Lehman Brothers' collapse, the largest bankruptcy in U.S. history. More than "one for the history books," this event goes down as the "weekend Wall Street died" and re-emerged as Zombieland -- the bleak home to once booming financial firms gone bust, feeding off the lifeblood of federal bailout money. That was then. Now, 365 days later, the experts see signs of life in the sector: a heartbeat of earnings, the pulse of profits, and the color of demand."

However, we do not think that an economic recovery is around the corner. Our view comes from subscribing to the Elliott Wave's Theorist and Elliott Wave Financial Forecast, which predict that we're in for another wave of a deeper economic contraction, at a much larger scale than what we have recently experienced.

So what to do? Take the antidote and download the FREE The Deflation Survival Guide.