{"id":2570,"date":"2009-06-22T11:01:24","date_gmt":"2009-06-22T16:01:24","guid":{"rendered":"http:\/\/countingpips.com\/fx\/?p=2570"},"modified":"2009-06-22T11:01:24","modified_gmt":"2009-06-22T16:01:24","slug":"is-the-world-finally-ready-to-accept-the-deflationary-scenario","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2009\/06\/22\/is-the-world-finally-ready-to-accept-the-deflationary-scenario\/","title":{"rendered":"Is the World Finally Ready to Accept the Deflationary Scenario?"},"content":{"rendered":"

This article is part of a syndicated series about deflation from market analyst Robert Prechter, the world’s foremost expert on and proponent of the deflationary scenario. For more on deflation and how you can survive it, download Prechter’s FREE 60-page Deflation Survival Guide now<\/strong><\/a>.<\/p>\n

The following article was adapted from Robert Prechter’s 2002 New York Times, Wall Street Journal and Amazon best-seller, Conquer the Crash \u2013 You Can Survive and Prosper in a Deflationary Depression<\/em><\/a>.<\/span><\/strong><\/p>\n

By Robert Prechter, CMT<\/p>\n

Seventy years of nearly continuous inflation have made most people utterly confident of its permanence. If the majority of economists have any monetary fear at all, it is fear of inflation, which is the opposite of deflation.<\/p>\n

As for the very idea of deflation, one economist a few years ago told a national newspaper that deflation had a \u201c1 in 10,000\u201d chance of occurring. The Chairman of Carnegie Mellon’s business school calls the notion of deflation \u201cutter nonsense.\u201d A professor of economics at Pepperdine University states flatly, \u201cRising stock prices will inevitably lead to rising prices in the rest of the economy.\u201d The publication of an economic think-tank insists, \u201cAnyone who asserts that deflation is imminent or already underway ignores the rationale for fiat currency \u2014 that is, to facilitate the manipulation of economic activity.\u201d A financial writer explains, \u201cDeflation\u2026is totally a function of the Federal Reserve’s management of monetary policy. It has nothing to do with the business cycle, productivity, taxes, booms and busts or anything else.\u201d Concurring, an adviser writes in a national magazine, \u201cU.S. deflation would be simple to stop today. The Federal Reserve could just print more money, ending the price slide in its tracks.\u201d Yet another sneers, \u201cGet real,\u201d and likens anyone concerned about deflation to \u201csmall children.\u201d One maverick economist whose model accommodates deflation and who actually expects a period of deflation is nevertheless convinced that it will be a \u201cgood deflation\u201d and \u201cnothing to fear.\u201d On financial television, another analyst (who apparently defines deflation as falling prices) quips, \u201cDon’t worry about deflation. All it does is pad profits.\u201d A banker calls any episode of falling oil prices \u201ca positive catalyst [that] will put more money in consumers’ pockets. It will benefit companies that are powered by energy and oil, and it will benefit the overall economy.\u201d Others excitedly welcome recently falling commodity prices as an economic stimulus \u201cequivalent to a massive tax cut.\u201d A national business magazine guarantees, \u201cThat’s not deflation ahead, just slower inflation. Put your deflation worries away.\u201d The senior economist with Deutsche Bank in New York estimates, \u201cThe chance of deflation is at most one in 50\u201d (apparently up from the 1 in 10,000 of a couple of years ago). The President of the San Francisco Fed says, \u201cThe idea that we are launching into a prolonged period of declining prices I don’t think has substance.\u201d A former government economist jokes that deflation is \u201c57th on my list of worries, right after the 56th \u2014 fear of being eaten by piranhas.\u201d These comments about deflation represent entrenched professional opinion.<\/p>\n

As you can see, anyone challenging virtually the entire army of financial and economic thinkers, from academic to professional, from liberal to conservative, from Keynesian socialist to Objectivist free-market, from Monetarist technocratic even to many vocal proponents of the Austrian school, must respond to their belief that inflation is virtually inevitable and deflation impossible.<\/p>\n

\u2026\u2026\u2026.<\/p>\n

For more on deflation, download Prechter’s FREE 60-page Deflation Survival Guide<\/a><\/span><\/strong> or browse various deflation topics like those below at www.elliottwave.com\/deflation<\/a><\/span><\/strong>.<\/p>\n