Deflation
"In the last three years, banks all over the world have printed trillions of dollars, in the hope of saving the world economy. In spite of this massive banking fraud, people continue to try and save money. Saving counterfeit money is insanity…pure stupidity." ~ Excerpt from Robert’s Conspiracy of the Rich bulletin.
What is about to happen in the markets and the economy in 2012 and the decade beyond was practically preordained back in the 1970s and 1980s…
And as you’re about to discover, there’s nothing you or I, or any politician or government, or any team of monetary experts can do to stop it.
As history has shown, these economic trends are virtually set in stone – as certain as the DNA with which we were born.
Some of the greatest fortunes have been made, not in boom times, but in down economies… by people who understood exactly what was going on:
The Kennedy fortune was made this way, buying up cheap companies and assets during depression era America.
Even Warren Buffet launched his career buying stocks on the cheap in the 1970s when nobody else had the stomach for it.
Point is, when you can be confident in where the future is heading – and know with good certainty which markets and investments will be impacted– there’s no limit to how much money you can make.
Knowing the Future Can Make You Wealthy
The secret is knowing what’s coming when -- and preparing yourself.
But the government’s stimulus plan will not work for more than a very short period of time, due to the slowing spending and rising savings of the largest generation in history! That’s why we have been saying: “All the kings horses and all the kings men will not be able to put Humpty Dumpty back together again.”
What’s more, this “baby boom effect” is being further amplified by the sudden and simultaneous collapse of real estate… and the massive debt amassed in that bubble, and now, in the government’s attempt to avert this “impossible to avert” event.
That’s why I’m here to tell you right now:
What lies ahead will be no ordinary recession.
-------------------------------------------- Deflation -------------------------------------------- The Greatest Credit Bubble In Modern History Will Continue to Deleverage… Deflation, Not Inflation, Is Just Ahead.
History tells us that most severe downturns and depressions have three phases.
1. A severe crash, like we saw in late 2007 to early 2009 – when the Dow fell 55%, from 14,280 down to 6,440.
2. That’s followed by a bear market rally, spurred by renewed economic from government stimulus. That’s where we are now.
3. The third phase is a final crash and deeper depression, and a deflationary phase that lasts a few years.
Deflation, as the name suggests, is the exact opposite of inflation.
Inflation happens when there’s lots of available credit, free flowing money and strong demand for goods and services. When everyone has access to money through easy loans and fast credit, the demand for “stuff” goes up. And when demand goes up… so do prices.
With deflation, the opposite occurs. There’s less money flowing because credit tightens up, causing money to become scarce. And because people have less money to spend, demand for goods and services go down. And when demand goes down – so do prices.
We have examined all of the great bubble and credit booms throughout history and there are no exceptions:
Once credit bubbles go to extremes they always burst and deflate… resulting in a sudden tightening of money supply (credit)… followed by deflation as massive amounts of debt are written off.
It happened in the 1930s and again most recently in Japan.
And because no government can counteract that kind of overwhelming debt with any amount of stimulus without making its currency next to worthless, it’s likely to happen as this new economic cycle settles in.
Stocks will see it coming first.
We believe markets will peak around the fall of 2011 (delayed a year or so from our earlier estimates thanks to the greatest stimulus spending in history) at around 13,200 or so in the Dow, then fall to around 3,300 to 3,800 between late 2012 and late 2014 .
After the rest will fall in line:
Bankruptcy rates will escalate, followed by a long line of bank failures.
Those banks that are left will be very careful about who they lend to and under what terms. Many will not lend at all, choosing instead to hoard cash while it gains value (i.e., buying power) through deflation.
Most will be very hard pressed to find qualified lenders to loan to, since a) so many borrower’s credit ratings will be destroyed walking away from homes and other loans, and b) further declining house prices will mean there’ll be very little equity to lend against.
Less credit means less money in the economy.
Less money means less demand for goods and services.
Less demand means lower prices and less production.
Less production means more plant closings and more job losses.
More job losses means…
Well, I think you’re getting the picture here. It’s all a domino effect.
Again I’ll say it:
For those who don’t prepare the impact will be devastating.
But if you see and trust that it’s coming, it’s an opportunity to make a lot of money… and we plan to tell you how every step of the way, as I’ll explain in a moment.
It’s also a very positive thing for the economy as a whole longer term.
That’s because deflation helps to “shake out the excesses” much quicker because it encourages a massive restructuring of debt, writing off of losses, trimming back of the supply chain, shifting of market share to the strongest and most efficient companies that can keep prices down in the future, and more.
This chart shows how much debt was eliminated during the last deflationary period of the 30s and 40s – thus paving the way for the greatest prosperity boom the country had ever seen post World War II:
These three ‘economic truths’ I’ve just told you about are the key components of the perfect storm brewing around our economy today: v The last of the largest generation of spenders in American history – Baby Boomers – leaving his and her peak spending years…
The biggest Credit Bubble of all time… $102 - $122 Trillion in government, corporate, personal and “entitlement obligation” debt – a number that simply can’t be sustained and will have to be deleveraged over the coming decade, much of it through bankruptcy and default – and restructuring of many entitlements that we have come to expect…
The greatest housing bubble in history, which will almost certainly lead to the greatest banking crisis in history… and more personal bankruptcies by everyday Americans and companies than any time in our history.
The impact of these three events all lead to one thing:
A severe tightening of credit… and the write-off off tens of trillions in loans and entitlements…
Which means less money in the system… which means less spending… less demand…falling prices… and ultimately:
Deflation.
Depression.
In deflationary times, cash is king. Because unlike what happens during inflation, money actually gains value when there’s deflation. It’s simple supply and demand. Money supply shrinks when there’s less lending and as debts are paid down and written off through foreclosure.
If you’re holding on to real estate – anything you’re not using as your home or that’s not generating good, steady and lasting income for you – sell it now.
Right now it’s about two things: Shedding inflated assets and high-cost debt… and moving stealthily into safer investments and cash – cash you’ll later be able to parlay into outstanding profits as the events of next economic cycle happen.
Long term Treasury bonds will be the first great long term play, likely later this year, then corporate bonds, then stocks, then real estate over time.
1) avert financial disaster and,
2) profit from the many opportunities that arise during periods of profound economic change.
If history has taught us anything, it’s that governments can’t spend their way out of enormous debt – especially the massive levels of debt chocking the US economy today.
Remember, when you include government, corporate, personal and entitlement debts and obligations, we’re in hock for over $100-- $120 trillion!
A lot of money… about $330,000 - $400,000 owed for every man, woman and child in the country.
Can you afford your share? How about half of it? Could you even write a check today for one quarter of it?
You’re not alone.
And we simply can’t print our way out of this like we have in the past.
Over the last two year’s the government has printed $2.3 trillion and look what’s happening already starting to happen:
Prices of hard assets like gold, silver, copper, oil and so on are skyrocketing driving up the cost of transportation, energy and manufacturing.
Food prices are soaring throughout the world because so many U.S. dollars – the reserve currency the world uses to buy many of them -- are flooding the market.
We predicted that this period of post-crisis inflation would happen…
But we simply can’t keep printing money the trillions needed to stimulate or inflate our way out of these massive debts!
And when that realization hits – well, that’s when the other shoe will fall.
Massive amounts of debt will need to be repaid or written off.
Money and credit will dry up.
Demand for all kinds of good and services will fall sharply… followed by falling prices.
And falling prices lead to layoffs and falling wages.
In short: depression and deflation.
http://www.boomandbustinvestor.com/pages/bnb/video/BNB1.php?pub=BNB&code=LBNBM820
And as you’re about to discover, there’s nothing you or I, or any politician or government, or any team of monetary experts can do to stop it.
As history has shown, these economic trends are virtually set in stone – as certain as the DNA with which we were born.
Some of the greatest fortunes have been made, not in boom times, but in down economies… by people who understood exactly what was going on:
The Kennedy fortune was made this way, buying up cheap companies and assets during depression era America.
Even Warren Buffet launched his career buying stocks on the cheap in the 1970s when nobody else had the stomach for it.
Point is, when you can be confident in where the future is heading – and know with good certainty which markets and investments will be impacted– there’s no limit to how much money you can make.
Knowing the Future Can Make You Wealthy
The secret is knowing what’s coming when -- and preparing yourself.
But the government’s stimulus plan will not work for more than a very short period of time, due to the slowing spending and rising savings of the largest generation in history! That’s why we have been saying: “All the kings horses and all the kings men will not be able to put Humpty Dumpty back together again.”
What’s more, this “baby boom effect” is being further amplified by the sudden and simultaneous collapse of real estate… and the massive debt amassed in that bubble, and now, in the government’s attempt to avert this “impossible to avert” event.
That’s why I’m here to tell you right now:
What lies ahead will be no ordinary recession.
-------------------------------------------- Deflation -------------------------------------------- The Greatest Credit Bubble In Modern History Will Continue to Deleverage… Deflation, Not Inflation, Is Just Ahead.
History tells us that most severe downturns and depressions have three phases.
1. A severe crash, like we saw in late 2007 to early 2009 – when the Dow fell 55%, from 14,280 down to 6,440.
2. That’s followed by a bear market rally, spurred by renewed economic from government stimulus. That’s where we are now.
3. The third phase is a final crash and deeper depression, and a deflationary phase that lasts a few years.
Deflation, as the name suggests, is the exact opposite of inflation.
Inflation happens when there’s lots of available credit, free flowing money and strong demand for goods and services. When everyone has access to money through easy loans and fast credit, the demand for “stuff” goes up. And when demand goes up… so do prices.
With deflation, the opposite occurs. There’s less money flowing because credit tightens up, causing money to become scarce. And because people have less money to spend, demand for goods and services go down. And when demand goes down – so do prices.
We have examined all of the great bubble and credit booms throughout history and there are no exceptions:
Once credit bubbles go to extremes they always burst and deflate… resulting in a sudden tightening of money supply (credit)… followed by deflation as massive amounts of debt are written off.
It happened in the 1930s and again most recently in Japan.
And because no government can counteract that kind of overwhelming debt with any amount of stimulus without making its currency next to worthless, it’s likely to happen as this new economic cycle settles in.
Stocks will see it coming first.
We believe markets will peak around the fall of 2011 (delayed a year or so from our earlier estimates thanks to the greatest stimulus spending in history) at around 13,200 or so in the Dow, then fall to around 3,300 to 3,800 between late 2012 and late 2014 .
After the rest will fall in line:
Bankruptcy rates will escalate, followed by a long line of bank failures.
Those banks that are left will be very careful about who they lend to and under what terms. Many will not lend at all, choosing instead to hoard cash while it gains value (i.e., buying power) through deflation.
Most will be very hard pressed to find qualified lenders to loan to, since a) so many borrower’s credit ratings will be destroyed walking away from homes and other loans, and b) further declining house prices will mean there’ll be very little equity to lend against.
Less credit means less money in the economy.
Less money means less demand for goods and services.
Less demand means lower prices and less production.
Less production means more plant closings and more job losses.
More job losses means…
Well, I think you’re getting the picture here. It’s all a domino effect.
Again I’ll say it:
For those who don’t prepare the impact will be devastating.
But if you see and trust that it’s coming, it’s an opportunity to make a lot of money… and we plan to tell you how every step of the way, as I’ll explain in a moment.
It’s also a very positive thing for the economy as a whole longer term.
That’s because deflation helps to “shake out the excesses” much quicker because it encourages a massive restructuring of debt, writing off of losses, trimming back of the supply chain, shifting of market share to the strongest and most efficient companies that can keep prices down in the future, and more.
This chart shows how much debt was eliminated during the last deflationary period of the 30s and 40s – thus paving the way for the greatest prosperity boom the country had ever seen post World War II:
These three ‘economic truths’ I’ve just told you about are the key components of the perfect storm brewing around our economy today: v The last of the largest generation of spenders in American history – Baby Boomers – leaving his and her peak spending years…
The biggest Credit Bubble of all time… $102 - $122 Trillion in government, corporate, personal and “entitlement obligation” debt – a number that simply can’t be sustained and will have to be deleveraged over the coming decade, much of it through bankruptcy and default – and restructuring of many entitlements that we have come to expect…
The greatest housing bubble in history, which will almost certainly lead to the greatest banking crisis in history… and more personal bankruptcies by everyday Americans and companies than any time in our history.
The impact of these three events all lead to one thing:
A severe tightening of credit… and the write-off off tens of trillions in loans and entitlements…
Which means less money in the system… which means less spending… less demand…falling prices… and ultimately:
Deflation.
Depression.
What Can We Do In Deflation?
The first order of business is to protect yourself and the assets you have. And that means getting out of investments that are designed to perform in an “up” market.In deflationary times, cash is king. Because unlike what happens during inflation, money actually gains value when there’s deflation. It’s simple supply and demand. Money supply shrinks when there’s less lending and as debts are paid down and written off through foreclosure.
If you’re holding on to real estate – anything you’re not using as your home or that’s not generating good, steady and lasting income for you – sell it now.
Right now it’s about two things: Shedding inflated assets and high-cost debt… and moving stealthily into safer investments and cash – cash you’ll later be able to parlay into outstanding profits as the events of next economic cycle happen.
Long term Treasury bonds will be the first great long term play, likely later this year, then corporate bonds, then stocks, then real estate over time.
1) avert financial disaster and,
2) profit from the many opportunities that arise during periods of profound economic change.
If history has taught us anything, it’s that governments can’t spend their way out of enormous debt – especially the massive levels of debt chocking the US economy today.
Remember, when you include government, corporate, personal and entitlement debts and obligations, we’re in hock for over $100-- $120 trillion!
A lot of money… about $330,000 - $400,000 owed for every man, woman and child in the country.
Can you afford your share? How about half of it? Could you even write a check today for one quarter of it?
You’re not alone.
And we simply can’t print our way out of this like we have in the past.
Over the last two year’s the government has printed $2.3 trillion and look what’s happening already starting to happen:
Prices of hard assets like gold, silver, copper, oil and so on are skyrocketing driving up the cost of transportation, energy and manufacturing.
Food prices are soaring throughout the world because so many U.S. dollars – the reserve currency the world uses to buy many of them -- are flooding the market.
We predicted that this period of post-crisis inflation would happen…
But we simply can’t keep printing money the trillions needed to stimulate or inflate our way out of these massive debts!
And when that realization hits – well, that’s when the other shoe will fall.
Massive amounts of debt will need to be repaid or written off.
Money and credit will dry up.
Demand for all kinds of good and services will fall sharply… followed by falling prices.
And falling prices lead to layoffs and falling wages.
In short: depression and deflation.
http://www.boomandbustinvestor.com/pages/bnb/video/BNB1.php?pub=BNB&code=LBNBM820
