Deflation Is Going To Cause A Scary New Kind Of Debt Crisis

BI - Money Week ^ | 12-1-2014 | Merryn Somerset Webb

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Merryn Somerset Webb
December 1, 2014

Russell Napier is a financial historian and the founder of ERIC, an online research firm that aims at connecting analysts and investors.

Here he talks to Merryn Somerset Webb about the next deflationary bust – why it’s coming, what it means for you, and how you can survive it.

Merryn Somerset Webb: Let’s start at the beginning. You are a firm believer, as I understand it, in the idea that we live in a deflationary environment and there’s almost nothing that central banks can do to change that. So, maybe talk a little bit about why you think that is.

Russell Napier: OK.

MSW: First why we’re in a deflationary environment?

RN: Sure. There are some very, very big building blocks of this. Just before I go into those, the reason why we in recent times have deflation is not because supply is bigger than demand. That’s not the dangerous deflation. You might actually say that might be a good deflation. It’s because at some stage in that transition process from inflation downwards, we have a credit event which creates a shock for the financial system. Of course, that’s famously what happened in 2008-2009. But that also happened in 1998 with Russia and LTCM [Long Term Capital Management, a hedge fund investment firm that collapsed after the Russian government bond crisis] and it happened in 1982 with Mexico and their banking system.

(snip)

[blam]

The Fed Is Rattled By Elusive Inflation, But Loath To Sound Alarm

[Mamzelle]

Why can’t we have both, deflation and inflation?

[central_va]

I paid 20 bucks for two smallish ny strip steaks over the weekend. My health insurance went up 30%. My car insurance went up 20%. What inflation?

[MrB]

It’s harder to swallow the “low” inflation rate than it is the “low” unemployment rate.

We’re all experiencing it.

[central_va]

You’re ok if you by slave made products from he turd world. TV’s etc. then you are ok.

[Iron Munro]

Why can’t we have both, deflation and inflation?

Someone else already had a similar idea.

Jimmy Carter's "Stagflation".

[MrB]

I don’t buy much of anything other than food, gas and utilities these days.

[central_va]

I paid 90 cents/gal for propane in the 1990’s. Now it costs 2.50/gal. No inflation there.

[blam]

What Are Traders Chatting About This Morning? Oil, Japan, And Black Friday...

"Good Morning! US Futures are under pretty good pressure this AM, with Russell and S&P off 40bp+. This mirrors global weakness, a combination of weak PMIs and collapsing commodity prices. The DAX is off only 20bp, but the FTSE has lost 1% as Europe’s Energy sector is off 2%, while the Miners are off 3% in decent volume. Looking over in Asia, while Russia’s ruble suffered the worst hit in 16years, the MICEX is jumping 3% - Japan gained 1% as falling Oil and Yen benefit their economy, but Moody's downgrades Japan's sovereign debt rating after Nikkei close, hitting futures for 40bp. Shanghai fell 40bp as China’s manufacturing activity fell to a 6M Low – whacking Aussie for 2% in heavy volume as Aussie’s energy sector fell 6.4%, taking 3day losses to 16%. "

DJIA Down 93.92 as I post

[oblomov]

Yes, it is a deflationary environment.

The CBs are foolish to believe that inflation can and should offset the deflation that is occurring due to prior malinvestment.

[blam]

"I don’t buy much of anything other than food, gas and utilities these days."

Me too. And, I mostly stay home, lol.

[Caipirabob]

Have no doubt that obama plans to deep six our economy before he leaves office.

[MrB]

Funny you mention it -
My sister’s house is on propane.
She said it was $4 last year and $2.5o this year.

[DJ MacWoW]

End It By Christmas?

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[blam]

Gold Surges Over $50 Off Overnight Lows; Commodities Bouncing As Dollar Weakens

[reformedliberal]

Our propane went down to $1.82/gal this year. The small tanks (15#-20#) are also lower by $2-$3. Last year our charges were $2.89 before the crisis in supply, when it briefly reached $6/gal. I use the 20# tanks in my business and they were regularly $18. Last price paid was $15.89+/-.

We cut a lot and found many different ways to buy items like meat at lower costs over the past 6 years.(most tips repeatedly posted on FR over this time period) The economy has eased a bit and business has increased a bit, but we are still spending as little as possible.

We do try and keep a supply of propane and gasoline on hand, so when prices dip, we buy some extra.

[EXCH54FE]

“I don’t buy much of anything other than food, gas and utilities these days.” And, I mostly stay home, Me too!!!

Yep, I’m in the same boat, cost of Living going up and can not remember when I had my last pay increase.

Cost of gas is going down, however king o will do something to stop that, after all we need gas at $6-7.00 per gallon.

[eyeamok]

When you realize that 4% annually of the value of each monetary unit has been Stolen through “inflation” over the last 100 years by the money changers. A lot of deflation must occur just to get back to even. Which scares the hell out of the Usury crowd. You might want to follow this also:

http://market-ticker.org/akcs-www?post=229627

Because the Money Changers will not take this lightly, they already have their master plan in the works, think Cyprus!!

[SVTCobra03]

I am still buying gold, silver, lead, copper and brass.