What Is Deflation?

What Is Deflation?  Why Is President Obama Making The Deflation Economy And Greater Depression Worse?

By Delwyn Lounsbury - THE DEFLATION GURU

Everyone is wondering, What is Deflation?  Are we going to have inflation or deflation?  President Obama's rhetoric and actions bashing business continues even when the statistics show the deflation economy getting worse at every turn.  The 9.6 unemployment rate does not include those that quit looking, went back to school, moved back in with mom and dad or started a life of crime or prostitution.  It sure does not include the businesses that have gone belly up and the rest of us who are seeing our income from sales and commissions drop.  President Obama's actions are, "bad to the bone," for boosting business.

What is deflation?  It is when business people only get more uncertain and unsure and prices start dropping.  Like the real estate crash.  This freeze up in hiring, business expansion and lending will lead to more trouble in the deflation economy. The <b>GREATER DEPRESSION</b> actually started in year 2000 with the dot com stock climax. The deflation economy cycle may not end until 2016 to 2018.  At that time most your assets may have lost 90% in price and unemployment could be 30%.  Even gold may be down 50% from today's lofty price of $1,350 per ounce, according to Robert Prechter, President of Elliot Wave International investment services.

Our report on:  What is deflation?  Is supported by some recent statistics.  One in seven Americans are considered under the poverty level.  That's 14% of the population or 44 million people.  Real estate foreclosures rose 25% in July of 2010 to 95,304, the highest number on record.  275 banks have closed -  The most since the 1930's.  Net worth - the total of Americans assets - homes and investments minus debts fell 2.7 per cent or $1.5 trillion in the second quarter of 2010 according to the Federal Reserve.  Total is now $58.5 trillion with a low of $48.8 in the first quarter of 2009 and an all time high of $65.8 trillion.  Finally, 41 million people are now on food stamps.  That is up 45 percent since 2008 when President Obama took office.

Helping the economy get top heavy and crash was the migration of many former union workers onto the government payroll.  Government employee hiring has increased 10% under the Obama Administration. They knew the government would not go out of business so they joined the bandwagon.
 
Some 22.5 million Americans are now employed in government jobs.  It is like a large parasite is sucking all the energy out of the economy.  Ever since Franklin Delano Roosevelt started the socialistic "New Deal," government has grown larger and larger.  If we are 10 years into the Greater Depression as Robert Prechter and I contend, this bloated government structure will make the depression worse.  Free enterprise and lower taxes letting business have the wherewithal to hire and expand is the only solution.
  
Nikolai Kondratiev, 1892-1938, discovered that capitalistic countries go through a long wave cycle of 60 to 80 years.  A cycle similar to the phases of nature with spring (inflation), summer (stagflation), autumn (deflation or disinflation) and finally winter (depression).  He paid his life for that discovery as Joseph Stalin had poor Kondratiev executed by firing squad in 1938. We are in the middle of the ending Kondratiev winter.  A phase that started in year 2000 according to Robert Prechter.
 
Just look at a 10 year chart of the NASDQ stock market, QQQQ or TII, a fund ETF of 75 major companies.  The graph shows that there was only a bear market rally.  These indexes never got back to the 2000 level. The QQQQ only made up 50% and the TII only made back 61.8% (both fibonacci numbers, by the way).  Fibonacci numbers and ratio are important to Robert Prechter's Elliott Wave Principle studies. The DOW and the S&P 500 did make new highs in the years since the 2000 top; but they are fudged by dropping the weak companies and adding stronger ones to these indexes
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The M-3 money supply is already dropping like rock.  It's down 10% this year.

"To put it succinctly, the stock market is a thermometer of public mood and a barometer of public action," Robert Prechter.

"A deflationary crash is characterized in part by a persistent, sustained, deep general decline in peoples' desire and ability to lend and borrow. A depression is characterized in part by a persistent, sustained, deep, general decline in production. Since a decline in production reduces debtors' means to repay and service debt, a depression supports deflation. Since a decline in credit reduces new investment in economic activity, deflation supports depression. Because both credit and production support prices for investment assets, their prices fall in a deflationary depression. As asset prices fall, people lose wealth, which reduces their ability to offer credit, service debt and support production. The mix of forces is self-reinforcing." That's what Robert Prechter's book, <i>CONQUER THE CRASH</i> (2002) says.

Economist, Paul Krugman’s, recent solution is just more socialism. He and "Helicopter" Ben Bernake, head of the FED want more stimulus money thrown at the problem.  They don't realize that at this stage in the deflation economy cycle it would just evaporate.  All the bailouts and government spending done so far have not turned the economy around.  The unemployment rate is still 9.6%.  Business people are very uneasy. Saddling America with more debt would be counter-productive. The <b>GREATER DEPRESSION</b> is coming. Why make it worse than it already is?  Better to reduce taxes and let businesses make the new jobs. Don't do what Franklin Roosevelt did.  Make up government paid jobs that disappeared when the project was finished and prolonged the end of the 1930's depression. President Obama admitted last week that there was no such thing as a "shovel ready job."

<b>STOP THE SPENDING</b>!  QE2 (Quantitative Easing #2) is planned to buy U.S. bonds at the rate of $75 billion a month.  Monetary stimulus that we might as well throw down a rat hole.

The fact is President Barack Hussein Obama is “all in” with his socialistic wealth redistribution programs. Paul Krugman should be ramping up the pressure on Obama from his pundit press position.

Obama is apparently carrying out his inebriated African father’s socialism dreams according to Dinesh D'Souza, author of a new book, <i>Roots of Obama's Rage</i> 2010.  It's like some kind of anticolonial nightmare in which the big bad U.S. has to pay for stealing everything the third world ever had by raising everyone's taxes to the moon.   Obama's dream quest is to right all colonial and imperial wrongs and rip offs of the last 2 centuries in just 4 years.  Obama is out of control with his wealth redistribution, increased taxes, socialism, business bashing and growth in the size of government. We are being governed by the socialist anticolonial ghost of Africa past.  Is this guy even a citizen?  Let's see his real birth certificate.  President Obama's self-written autobiography is titled, <i>DREAMS FROM MY FATHER</i>, so don't try and tell me otherwise.  Note it is titled Dreams "from" my father not "of" my father.  Obama Junior is writing about and acting on dreams he received from his Kenyan socialist father???  And we suffer the consequences???

Those of you who voted for Barack Hussein Obama for president may have a big dose of buyers remorse over his super cycle scale ambition of ruining America, it's Constitution and it's <b>FREEDOMS</b>.   We have a president in office that hates the United States and hates business in general.   Business people are rightly afraid and have gone on the defensive.  Unfortunately, this means they have slowed their expansion and hiring plans.  Right when the economy needs help the most.
 
The takeover of America by a coalition of big business and government is Webster's definition of fascism.  Fascism and Socialism never work.  Too many on the dole kills the free enterprise spirit of the rest.  What about later when President Obama really goes to work on a one-world-government and new-world-order "Big Brother" society?  Why did President Obama get the Nobel Peace Prize and the one million dollars that comes with it?  He hadn't done anything to deserve it.  Was it an up front mafia like contract payment from the world power elite for one-world-government wet work to be done later?  Be very afraid of the IMF (International Monetary Fund).  They the World Bank, the UN or possibly a new yet to be formed "Cap And Trade" world organization may become "Big Brother."  You then loose your <b>LIBERTY</b> and will be told what to do and what to think cradle to grave.
    
What is deflation?  It is a vicious cycle of lower and lower prices of just about everything like a snowball rolling down the hill getting bigger and bigger.  Cash will be king.  More unemployment begets more unemployment as the multiplier effect goes into reverse.  Hopefully government will have less revenue and become smaller.  Yes, I'm a libertarian.  I am for small government.  Contract out  most of the stupid greedy gorging spendthrift government to the lowest bidder - but have an army for protection and a police force.   The financial power elite will just get richer because they know deflation is coming and the value of their cash will be going up.  Then in 2016 or so they will buy back the assets that have dropped 90% from peak.  You should do the same.

Our only real chance is if gold becomes money again.  Private gold money would at least be honest and prevent a future (10 to 15 years from now) runaway inflation.  First get Prepared for the <b>GREATER DEPRESSION</b> before it is too late!  This time if you don't have the darn fiat paper money stashed safely and where you can get at it quickly or you and your family will be toast.

Copyright 2010 by Delwyn Lounsbury - THE DEFLATION GURU
Use allowed with attribution back to: http://www.deflationeconomy.com/