brambleblog

Deflation happens all the time. Within a given market, the dynamics of supply and demand can regularly cause periods of deflation - a somewhat ordinary event. However, the deflation we are now experiencing across most markets and across the globe is indeed extraordinary. It is exactly the breadth and depth of this deflation that makes it so phenomenal.

A crisis wrought by decades of credit-fueled bubbles has shocked the global economy sufficiently to cause economic contraction... Buyers are not buying. Spenders are not spending. Lenders are not lending. In other words, a decrease in demand across all sectors and continents, causing supply and inventory to behave accordingly, i.e. lower price levels. Deflation. This is no longer a liquidity problem - it is a paradigm shift. Peak credit. It's all downhill from here.

Such rampant deflation is rare enough, and we are getting this dose on a global scale. This is unchartered territory, and it terrifies the power brokers on Wall St. and in Washington D.C. They are powerless against deflation (the policies set in motion by our "leadership" and their minions have failed miserably thus far) which is exactly why they are working overtime to catalyze inflation. These same experts and power brokers believe they can 'control' inflation, thus it is preferable to all other possibilities and must be encouraged at all costs. This backdrop goes a long way in explaining many recent frauds... the bankster bailouts, stimulus checks, monetization of debt, quantitative easing, vaporous stock market rallies, federal budget spending/deficit, extension of military action... all of these things are intended (at least in part) to help trigger inflation (by somehow creating demand). Our leadership (esp. in the US) is facilitating and bankrolling evermore of the same behavior that caused the current global economic crisis in the first place.

I underestimated the severity of this current deflationary period - I had expected inflation to take root more quickly as our leaders flooded the globe with money created from thin air. But nobody is buying, and fewer can afford to be the ones selling. So this deflation is re-inforcing itself, frustrating the inflationary efforts of our short-sighted leaders. For even if inflation does come sooner than later, it will not be "controllable". Currency events go in only one direction. Thus we can expect the worst of both worlds... stubborn deflation in the short-term, and hyper-inflation thereafter.

My advice for businesses and individuals alike: minimize exposure to risk (including fiat currency such as the $USD) eliminate debt, reduce costs, shorten your supply chain (localize), and boost self-reliance.

--MP