Deflation. Is this really a problem? What would one expect after Inflation????

2007 and the first half of 2008 were marked by hyper inflation, on a global scale.  Is this all but forgotten?  There were fears the world would run out of oil and gas and market prices reflected those fears.  All the corn in the world was being consumed by the soda makers and the ethanol refineries, leaving no corn left for food.  Because of the corn prices skyrocketing, the price per pound of beef, pork and fish bounded higher.  The global effects caused rice prices in Asia to move higher by 150% and the prices of bread in South Africa rose to beyond the reach of the typical laborers.

About the same time, the fear that there was not enough copper, steel, cement and investment bankers forced pricing on a global scale higher and higher.  The US dollar was devaluing because the US did not produce anything that was to be needed by a commodity hungary world, but for our corn and ethanol, and investment bankers.

How the world has changed in less than 6 months!!!!!!!!!!!!! Pricing on all commodities, except gold, has crumbled.  Oil is trading at less than 30% of it’s July pricing.  Prices of copper, steal, wood, cardboard, and other commodities have stumbled.  Mergers are being called off.  Capital expansion plans cut.  Factories closed and layoffs announced, daily.

The global movement of capital, the life blood of economic vitality, has ceased.  All  that follows the flow of capital has ceased as well.  Demand for goods, not only in the US but around the globe, is off by 20+%, forcing prices down further.

All that capital is looking for homes and has found it in the US Treasuries, for the time being.  Thus, the yields on Treasuries has crashed to unheard of lows.

We went from the cycle of fear regarding inflation to the publicized fear of deflation.  The Fed is afraid.  The media is afraid.  The world has become afraid, and PE Obama and his team are afraid.

The fear is that consumers will defer purchases, as they await further reductions in pricing.  This has been documented today as “already occurring” per the Wall Street Journal.  The percentage of ordinary folks who state they are done holiday shopping is down from last year.  People claim they have been waiting for more sales and lower pricing.

I can tell you what people have been waiting for.  It is the same reason US (and foreign) car sales have plummeted since September.  It is the same reason people are eating out less.  It is the same reason that the wealthy are drinking only one expensive bottle of wine at dinner, rather than three!

People do not want to spend money.  They are deferring spending out of fear, not waiting for lower prices.  People are waiting for money before they spend (a) what they do not have, (b) what they have lost in the markets, or (c) what they have lost to theft, fraud or incompetence of the Treasury, Wall Street, Madoff, Peterson, the Greenwich Hedge Funds, or Dubai real estate.

People are not waiting for lower prices!!! They are waiting for money!!! They are waiting for credit! They are waiting for some positive economic news! News that indicates the worst is behind us.  News that the markets will get better.  News that the ranks of the unemployed will go down, that compensation will go up, that layoff are a thing of the past.

We are seeing in pockets of real estate markets, no matter how low the price goes, inventory is not clearing.  Condos that in Naples, Florida, for example, once sold at $350,000, went to market at $250,000, were reduced to $150,000 and the owner would gladly sell it at $100,000 to relocate to see her grandchildren.  That’s not happening though.  No takers.  There are six other units in the same building with similar stories, and other stories like it from Miami, to NY, to LA and Michigan and everywhere in between.

People do not want to spend.  Many people can not spend.  Many must wait to spend.  It is not a question of pricing, they are not looking to get more for less, they are looking to buy something only when absolutely needed, and when they have the excess $ to purchase.  Otherwise they will go without………………

The Road Will Be Long, With Many (a) Winding Turn(s)………..

The Red Plague spreads further.  The virus embeds and morphs…………………

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