We Will Have DEFLATION and HYPERINFLATION at the SAME TIME!

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Deflationary forces in commodity prices have been dominant for several years. However, inflationary forces in bonds and stocks (equities) have been dominant for over six years. 

Based on the massive increase in global debt of over $50 Trillion since the 2008 crisis, the often stated intention of central banks to create inflation (they fear deflation in bonds and equities), and the need for government to inflate away their debts, we can be assured of more monetary and price inflation in our future. 

But we can also be assured of more price deflation in our future – the consequence of asset bubbles, mal-investment, and the inevitable corrections.

 

 

 

 

 

DEFLATIONARY TRENDS

The Baltic Dry Index, which measures the cost of global maritime transport, is below crisis levels (2008/9, 2012 crisis), and falling.

 

Dr. Copper, the indicator of global economic activity and health, is flashing a similarly unhealthy signal; prices have created a huge descending triangle. And we all know the story with the oil prices.

 

Countries experiencing deflation and inflation: Further confirmation of deflation can be seen in the chart below which shows an increasing number of countries experiencing deflation.

 

Governments and central banks are so indebted that excessive debt has destroyed their economy’s ability to generate wealth. The marginal utility of paper money is truly sinking, as shown by the fact that in 1950-60 every US$ of debt created 2.41 US$ of growth while today only 0.03 US$ is created with an additional dollar of debt.

 

The End Game

Expect deflationary forces to eventually overwhelm the stock and bond markets, probably soon, and expect the deeply over-sold commodity markets to move higher.

Depending on the magnitude of additional “money printing” that the world’s central banks will unleash upon the global financial community, we could see hyperinflation in several countries within a few years.

Why?

Central banks will try everything to avoid or reverse a deflationary collapse in paper asset markets because a deflationary collapse is “game over” for their credibility, governments, and politicians. They will print and print more and continue to fuel the inflationary boom, and … the bigger the boom, the larger the distortions, and the deeper the collapse.
 

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