Deflation! Us & Europe 2006 Ending 2009!

[Harmonica]

That's my long-term call! ..... made today, June 22nd, 2005 !

For further understanding of the effects of a deflationary crisis refer to historical evidence relating to the 1929 stock market crash and the deflationary period that occurred thereafter.

No technical analysis for this subject, just obsevations about the structural defects of the World Economy -- so all can participate.

I think I'm the only fella here at TV who has mentioned Deflation is a few posts in the recent past but don't believe that a single other poy-son has even responded --neither have they raised the issue.

Easy Al and rest of the gang and the followers are too busy worrying about Inflation and/or Disinflation.

At least one of the requirements for Deflation is currently RIPE -- and that is?

Nobody (almost) is expecting it !

Want to prepare for this so that you and your family can be on the right side of the avalanche?

Start by offering some definitions for Deflation.

[Erwin1011]

Deflation = steady reduction of consumer prices.

Either through increase in purchasing power (net disposable income) or reduction in money suply or credit availablility.

Disinflation = a reduction in the rate of increase of inflation

Economics 101.

[cclub75]

Start by offering some definitions for Deflation.

<{POST_SNAPBACK}>

Deflation is something well documented, a scary phenomenon. Look Japan = more than 10 years ! But it remains complicated... Prices can be reduced.... for good reasons (competition etc.).

I remember in Europe in 1993, we were talking about deflation.

So what's your point ? If you believe that deflation might come in Europe and US, explain.

Personaly, I would follow you but for Europe only : yeah we are going to face (it started already) a "Growth zero".

And a slow decline because of our structural problems : aging population, unqualified and unemployed immigration, huge social deficit (healthcare system), pensions for old people (the system is dead), public debts etc.

[TokyoT]

Start by offering some definitions for Deflation.

<{POST_SNAPBACK}>

Deflation is something well documented, a scary phenomenon. Look Japan = more than 10 years ! But it remains complicated... Prices can be reduced.... for good reasons (competition etc.).

I remember in Europe in 1993, we were talking about deflation.

So what's your point ? If you believe that deflation might come in Europe and US, explain.

Personaly, I would follow you but for Europe only : yeah we are going to face (it started already) a "Growth zero".

And a slow decline because of our structural problems : aging population, unqualified and unemployed immigration, huge social deficit (healthcare system), pensions for old people (the system is dead), public debts etc.

<{POST_SNAPBACK}>

I am not coming down on either side of this issue – for or against the possibility of deflation. However many of the reasons you listed for possible deflation in Europe is also accruing in the US.

Growth zero – not quite true in the US

Aging population – true in the US but not to the extent of many European nations

Unqualified and unemployed immigration – Can not confirm the status of this issue in the US

Huge social deficit (healthcare system) – Soon to be true in the US –medicare/medicade

Pensions for old people (the system is dead) – Social security is also closing in on death

Public debt – US debt problems both in government debt, current account deficient, and large personal debt levels

[Teach]

Deflation

A major societal build-up in the extension of credit (and its flip side, the assumption of debt). Near the end of a major expansion, few creditors expect default, which is why they lend freely to weak borrowers. Few borrowers expect their fortunes to change, which is why they borrow freely. Deflation involves a substantial amount of involuntary debt liquidation, because almost no one expects deflation before it starts.

What triggers the change to deflation?

A trend of credit expansion has two components: the general willingness to lend and borrow and the general ability of borrowers to pay interest and principal. These components depend respectively upon:

(1) the trend of people's confidence, i.e., whether both creditors and debtors think that debtors will be able to pay, and

(2) the trend of production, which makes it either easier or harder in actuality for debtors to pay.

So as long as confidence and production increase, the supply of credit tends to expand. The expansion of credit ends when the desire or ability to sustain the trend can no longer be maintained. As confidence and production decrease, the supply of credit contracts.

The psychological aspect of deflation and depression cannot be overstated. When the social mood trend changes from optimism to pessimism, creditors, debtors, producers and consumers change their primary orientation from expansion to conservation:

* As creditors become more conservative, they slow their lending.

* As debtors and potential debtors become more conservative, they borrow less or not at all.

* As producers become more conservative, they reduce expansion plans.

* As consumers become more conservative, they save more and spend less.

These behaviors reduce the "velocity" of money, i.e., the speed with which it circulates to make purchases, thus putting downside pressure on prices. These forces reverse the former trend.

What else triggers the change to deflation?

The structural aspect of deflation and depression is also crucial. The ability of the financial system to sustain increasing levels of credit rests upon a vibrant economy. At some point, a rising debt level requires so much energy to sustain – in terms of meeting interest payments, monitoring credit ratings, chasing delinquent borrowers and writing off bad loans – that it slows overall economic performance. A high-debt situation becomes unsustainable when the rate of economic growth falls beneath the prevailing rate of interest on money owed, and creditors refuse to underwrite the interest payments with more credit.

When the burden becomes too great for the economy to support and the trend reverses, reductions in lending, spending and production cause debtors to earn less money with which to pay off their debts, so defaults rise. Default and fear of default exacerbate the new trend in psychology, which in turn causes creditors to reduce lending further. A downward "spiral" begins, feeding on pessimism just as the previous boom fed on optimism.

The resulting cascade of debt liquidation is a deflationary crash. Debts are retired by paying them off, "restructuring" or default. In the first case, no value is lost; in the second, some value; in the third, all value. In desperately trying to raise cash to pay off loans, borrowers bring all kinds of assets to market, including stocks, bonds, commodities and real estate, causing their prices to plummet. The process ends only after the supply of credit falls to a level at which it is collateralized acceptably to the surviving creditors.

Bob Prechter

T.

[Harmonica]

Deflation

A major societal build-up in the extension of credit (and its flip side, the assumption of debt). Near the end of a major expansion, few creditors expect default, which is why they lend freely to weak borrowers. Few borrowers expect their fortunes to change, which is why they borrow freely. Deflation involves a substantial amount of involuntary debt liquidation, because almost no one expects deflation before it starts.

What triggers the change to deflation?

A trend of credit expansion has two components: the general willingness to lend and borrow and the general ability of borrowers to pay interest and principal. These components depend respectively upon:

    (1) the trend of people's confidence, i.e., whether both creditors and debtors think that debtors will be able to pay, and

    (2) the trend of production, which makes it either easier or harder in actuality for debtors to pay.

So as long as confidence and production increase, the supply of credit tends to expand. The expansion of credit ends when the desire or ability to sustain the trend can no longer be maintained. As confidence and production decrease, the supply of credit contracts.

The psychological aspect of deflation and depression cannot be overstated. When the social mood trend changes from optimism to pessimism, creditors, debtors, producers and consumers change their primary orientation from expansion to conservation:

    * As creditors become more conservative, they slow their lending.

    * As debtors and potential debtors become more conservative, they borrow less or not at all.

    * As producers become more conservative, they reduce expansion plans.

    * As consumers become more conservative, they save more and spend less.

These behaviors reduce the "velocity" of money, i.e., the speed with which it circulates to make purchases, thus putting downside pressure on prices. These forces reverse the former trend.

What else triggers the change to deflation?

The structural aspect of deflation and depression is also crucial. The ability of the financial system to sustain increasing levels of credit rests upon a vibrant economy. At some point, a rising debt level requires so much energy to sustain – in terms of meeting interest payments, monitoring credit ratings, chasing delinquent borrowers and writing off bad loans – that it slows overall economic performance. A high-debt situation becomes unsustainable when the rate of economic growth falls beneath the prevailing rate of interest on money owed, and creditors refuse to underwrite the interest payments with more credit.

When the burden becomes too great for the economy to support and the trend reverses, reductions in lending, spending and production cause debtors to earn less money with which to pay off their debts, so defaults rise. Default and fear of default exacerbate the new trend in psychology, which in turn causes creditors to reduce lending further. A downward "spiral" begins, feeding on pessimism just as the previous boom fed on optimism.

    The resulting cascade of debt liquidation is a deflationary crash. Debts are retired by paying them off, "restructuring" or default. In the first case, no value is lost; in the second, some value; in the third, all value. In desperately trying to raise cash to pay off loans, borrowers bring all kinds of assets to market, including stocks, bonds, commodities and real estate, causing their prices to plummet. The process ends only after the supply of credit falls to a level at which it is collateralized acceptably to the surviving creditors.

Bob Prechter

T.

Well said, Teach. Robert Prechter has unquestionably the best all-round definition and there is, IMHO no need to look further.

To Erwin, Economics 101? If big D does occur, then what might be said of the experts who didn't call it? Hehehehe

But all input is good because this is a relatively tough subject and the effects of its onslaught, tougher still.

[Harmonica]

Check this out ....

June 15 Reuters observes, individuals aren’t the only ones who will be affected by the overhaul: “There are as many as nine times more bankruptcies involving businesses than current government data suggests… The new law may discourage entrepreneurs from taking risks.”

Choose your own ending: Less risk equals fewer companies starting up equals fewer jobs to fill equals potentially “catastrophic consequences” for the entire U.S. economy.

Read the entire story at elliottwave int. website.

[Rags]

Want to prepare for this so that you and your family can be on the right side of the avalanche?

Start by offering some definitions for Deflation.

<{POST_SNAPBACK}>

Harmonica - Teach appears to have provided a definition that satisfies your request.....now what should we do to prepare?....in layman's terms please

Rags

[thedude]

the current deflationary phenomenon is nothing new, in fact its been discussed in business journals as far back as 2002 when observations were made regarding the dominance of China exports and how cheap Chinese production is driving consumer product prices down worldwide. consumer markets are already flooded with products that are now made in China that are much cheaper than there were a few years back...plasma and LCD screens are good examples. and as Chinese production capability moves upscale, they will start to actively acquire and develop their own technology as well as buy foreign brands to help leapfrog the global distribution hurdle (Lenovo buys IBM, Haeir is buying Maytag, Oracle is moving to China?!).

what you are witnessing is nothing less than a real shift in economic fortunes, history before your eyes. by flooding the market with Chinese products, they are in effect sucking up the world's capital and building up its own relative wealth. the immediate focus to get China to float the Yuan i feel will only allow a temporary reprieve. the tide is already turning. the property asset bubble in the US is a bubble waiting to burst. Once that happens, we will get a pretty big shock, but it may be the Chinese who will lead us out of depression the next time round, not the americans.

[Harmonica]

Want to prepare for this so that you and your family can be on the right side of the avalanche?

Start by offering some definitions for Deflation.

Harmonica - Teach appears to have provided a definition that satisfies your request.....now what should we do to prepare?....in layman's terms please

Rags

You're absolutely right, Rags.

There's alot that can be done but I can start with the most obvious.

(1) Do not get involved with or start any new venture/business now.

(2) Hold Cash or cash equivalents. The value of Cash will soar exponentially in a deflationary period and will blow all (?) other investments out the door.

(3) Dump all investment real estate at current exorbitant prices!

(4) Stay clear of going LONG long-term the stockmarkets and/or precious metals & commodities. If you really must play, consider going SHORT when the right time arrives.

(5) If you've been contemplating having a baby, have it now. If you wait you might not be able to get it up for quite some time to come due to the overwhelming pessimism that will envelop & surround us.

(6) Do not make any loans to friends or anybody!

(7) Do not borrow and if you have any debts, pay them off rapidly & NOW!

(8) Pick a safe bank. (See notes below)

(9) If Thailand gets hit by this monster (albeit to a lesser &/or shorter degree), your gal's (or wife's) family will need all the help they can get -- (this comment made generally). They will find it extremely difficult to survive without your sustenance. You will feel like a million bucks as you help them stay afloat and solvent emotionally and financially. My non-thai family members will survive without help, so my primary focus will be immediate, and relatively not so distant, thai family members. To each his own, but that is what I personally am prepared to do.

Regarding "safe banks" ...... Robert Prechter has written quite a few updated articles on the subject.

His book, "Conquer the Crash" is highly recommended.

OK, Rags?

[Rags]

Mmmm food for thought - thanks Harmonica

Hold Cash - any particular currencies?

What about pensions - getting out early is penalised pretty heavily, is it worth putting 'good money after bad' under your predicted scenario?

Don't worry, I am just mulling these thoughts over, and am not necessarily planning to act upon all your advice. Merely interested in options for avoiding poverty

Rags

Edited June 23, 2005 by Rags

[Harmonica]

the current deflationary phenomenon is nothing new, in fact its been discussed in business journals as far back as 2002 when observations were made regarding the dominance of China exports and how cheap Chinese production is driving consumer product prices down worldwide.  consumer markets are already flooded with products that are now made in China that are much cheaper than there were a few years back...plasma and LCD screens are good examples.  and as Chinese production capability moves upscale, they will start to actively acquire and develop their own technology as well as buy foreign brands to help leapfrog the global distribution hurdle (Lenovo buys IBM, Haeir is buying Maytag, Oracle is moving to China?!).

what you are witnessing is nothing less than a real shift in economic fortunes, history before your eyes.  by flooding the market with Chinese products, they are in effect sucking up the world's capital and building up its own relative wealth.  the immediate focus to get China to float the Yuan i feel will only allow a temporary reprieve.  the tide is already turning.  the property asset bubble in the US is a bubble waiting to burst.  Once that happens, we will get a pretty big shock, but it may be the Chinese who will lead us out of depression the next time round, not the americans.

China is expected to suffer hugely in the coming deflation/depression.

The fact that Japan has endured deflation for 15 years coupled with the fact that its market charts are clearly (?) indicating that there is one more (or a continuation of the 2000-2003 leg down) might turn out to be the blessing (?) for Thailand -- that it might not be subjected to a long fallout.

Like I said, it pays to study the 1929 crash/depression for possible clues as to what might occur. There is however a very significant point to consider here. The coming turn to the downside is at several degrees of Trend -- meaning .... it is much, much larger in scope than the 1929 crash as it is correcting a "century +" uptrend.

[Harmonica]

Mmmm food for thought - thanks Harmonica

Hold Cash - any particular currencies?

What about pensions - getting out early is penalised pretty heavily, is it worth putting 'good money after bad' under your predicted scenario?

Don't worry, I am just mulling these thoughts over, and am not necessarily planning to act upon all your advice.  Merely interested in options for avoiding poverty 

Rags

Right now its the Dollar; down the road? don't know. Still expect it to be the $ but will know when the time comes which one to switch to.

Options for avoiding poverty? I like that!

[Azul_Blanco]

elliotwave.com is a good place to go for the deflation angle. I'd welcome it but we'll see...

[~G~]

OK, if we do a very brief summary of the main views expressed here -

Harmonica: Deflation is coming soon. Big Time.

Teach: Will happen when production will fall followed by credit supply.

thedude: Already happening due to cheap chinese production.

At this point I would like to ask the OP, Harmonica, for some Evidence! Could you mention what is the basis for this prediction?

And for "thedude": I agree with you that some products are just getting cheaper and cheaper. But real deflation, as I understand it, is an overall trend related to falling investment and consumption - not for production moving from one place to another. Doesn't the cheaper manufacturing option, opened in the last years in China, just increases the overall level of investment and production?

I personally know of a product, western development, which is manufactured these days in China in millions of units, and would probably not turn from an idea of a few professors to a successful product, if it wasn't for the cheaper manufacturing option. So if deflation is coming, I am not sure the reason is neccessarily China.

Edited June 23, 2005 by ~G~

[mrbojangles]

I personally know of a product, western development, which is manufactured these days in China in millions of units, and would probably not turn from an idea of a few professors to a successful product, if it wasn't for the cheaper manufacturing option. So if deflation is coming, I am not sure the reason is neccessarily China.

I'm a bit iffy about the situation in China ~G~. We all can only speculate of course but IMHO I think that the economy in China is growing way too fast. Over the last decade they have gone from having 4 cycle lanes and 1 motor car lane to now only having 1 cycle lane and 4 car lanes. They went from hardly anybody having a land line telephone to everyone having mobile phones. Nobody had VCR's they jumped to everyone having DVD players. Thus showing how the level of wealth is growing. The demand for Steel and other raw material's is so high that it is pushing up the prices of the raw material's and so therefore pushing up the cost of the finished products. The machinery that labourers use is poor and doesn't conform to Health and Safety. This didn't matter before as anybody who lost a limb would be tossed onto the streets and replaced. All of this would have to improve as they move towards being in the WTO and workers are getting harder to come by. Legislation like this always pushes up prices (big reason why we are not competitive). This isn't a concern at the moment as the prices are still very cheap but prices don't have to go up by much for Importers of Chinese goods to think "It's not worth the hassle" dealing with shipping times and customs and the language barriers etc.

Just my 2 pennies worth, and having been there many times.

Mr BoJ

[~G~]

Interesting post, Mr. Boj - as far as I understand, the trend you predict is opposite to what Harmonica and thedude predict - you talk about rising prices while they predict falling prices.

If the costs will rise in China - this means higher prices in the US as well. Not lower. So according to your post, again china cannot be the reason for deflation.

[mrbojangles]

Interesting post, Mr. Boj - as far as I understand, the trend you predict is opposite to what Harmonica and thedude predict - you talk about rising prices while they predict falling prices.

If the costs will rise in China - this means higher prices in the US as well. Not lower. So according to your post, again china cannot be the reason for deflation.

Sorry ~G~, my post wasn't meant to be a prediction against deflation it was just meant to be an observation that i have found in China after going many times and importing from there. I don't really do hedging and forecasting, i quite simply buy from where the best deal is to be had. However, now I am trying to forecast , I don't fully agree with the principle of "if the costs rise in China it will rise in the US as well". It depends on the reasons why the costs have risen i.e. the cost of raw materials or the cost of labour. The main reason China is so cheap is down to labour intensive jobs. If their wealth continues to grow at this rate, the labour force will be demanding almost the same pay as in the US (not neccessarily within the next decade). All i am saying is, at the moment it is in my benefit and worth the hassle to import from China but i have started to see prices rise.

Mr BoJ

[expatinasia]

Comparing the Japanese economy to that of Thailand, and then extrapolating the Japanese deflation onto Thailand is wrong wrong wrong. It's wrong on so many levels it's like shadowboxing. If you alter your investment program now because of your anticipation of deflation, you will miss many opportunities, including living well for the next decade.

[~G~]

I don't fully agree with the principle of "if the costs rise in China it will rise in the US as well". It depends on the reasons why the costs have risen i.e. the cost of raw materials or the cost of labour. 

<{POST_SNAPBACK}>

Now I see the misunderstanding - the issue I mentioned is manufacturing costs in China in relation to consumer prices in US - not US cost VS Chinese cost, sorry if that was not clear in my post.

If the costs will rise in China - this means higher prices in the US as well. Not lower. So according to your post, again china cannot be the reason for deflation.

As the west is importing chinese products, higher production costs in China of such products will result in higher consumer prices in ths US.

And back to deflation, the topic of this thread - evidence??

Edited June 24, 2005 by ~G~

[Rags]

Mmmm food for thought - thanks Harmonica

Hold Cash - any particular currencies?

What about pensions - getting out early is penalised pretty heavily, is it worth putting 'good money after bad' under your predicted scenario?

Don't worry, I am just mulling these thoughts over, and am not necessarily planning to act upon all your advice.  Merely interested in options for avoiding poverty 

Rags

<{POST_SNAPBACK}>

Right now its the Dollar; down the road? don't know. Still expect it to be the $ but will know when the time comes which one to switch to.

Options for avoiding poverty? I like that!

<{POST_SNAPBACK}>

...and what are your views on existing pensions - getting out early is penalised pretty heavily, is it worth putting 'good money after bad' under your predicted scenario?

[Harmonica]

Comparing the Japanese economy to that of Thailand, and then extrapolating the Japanese deflation onto Thailand is wrong wrong wrong.  It's wrong on so many levels it's like shadowboxing.  If you alter your investment program now because of your anticipation of deflation, you will miss many opportunities, including living well for the next decade.

Incorrectly duplicated, maestro.

Let me explain -- Thailand is a small country surrounded by some larger players and some worldclass players.

Who, you might ask? Japan, the world's 2nd largest economy, followed by Hong Kong, Taiwan, Korea, Singapore, Malaysia, Indonesia & Phillippines.

It is a well known fact that top analysts in this neck of the woods use a composite index of the above mentioned counties' stockmarkets to gauge where Thailand will be or not be in the future.

Why do they do this -- seems like an excercise in futility and a difficult one, I might add?

Because Thailand follows the general trend of the region -- faithfully and obediently!

Comparing Japan's historical chart to that of Thailand could throw one easily off the scent because there are differences -- one being the 1989 Nikkei top versus the 1994 SET Index top. But taken as a group Thailand unquestionably FOLLOWS the regional trend!

Amen!

[Harmonica]

OK, if we do a very brief summary of the main views expressed here -

Harmonica: Deflation is coming soon. Big Time.

Teach: Will happen when production will fall followed by credit supply.

thedude: Already happening due to cheap chinese production.

At this point I would like to ask the OP, Harmonica, for some Evidence!    Could you mention what is the basis for this prediction?

G, remember the question you asked me back in a previous thread about Mass Social Mood? ......

Well, combined with evidence of Deflation -- all will be taken up in this thread as it is the appropriate subject that will encompass concepts such as these.

[~G~]

Comparing the Japanese economy to that of Thailand, and then extrapolating the Japanese deflation onto Thailand is wrong wrong wrong.  It's wrong on so many levels it's like shadowboxing.  If you alter your investment program now because of your anticipation of deflation, you will miss many opportunities, including living well for the next decade.

<{POST_SNAPBACK}>

Incorrectly duplicated, maestro.

Let me explain -- Thailand is a small country surrounded by some larger players and some worldclass players.

Who, you might ask? Japan, the world's 2nd largest economy, followed by Hong Kong, Taiwan, Korea, Singapore, Malaysia, Indonesia & Phillippines.

It is a well known fact that top analysts in this neck of the woods use a composite index of the above mentioned counties' stockmarkets to gauge where Thailand will be or not be in the future.

Why do they do this -- seems like an excercise in futility and a difficult one, I might add?

Because Thailand follows the general trend of the region -- faithfully and obediently!

Comparing Japan's historical chart to that of Thailand could throw one easily off the scent because there are differences -- one being the 1989 Nikkei top versus the 1994 SET Index top. But taken as a group Thailand unquestionably FOLLOWS the regional trend!

Amen!

<{POST_SNAPBACK}>

24% of Thailand's imports are from Japan and 17% from ASEAN.

14% of Thailand's exports are to Japan and 21% to ASEAN.

So 41% imports, 35% exports, still not including HK, Taiwan and Korea. Strong ties!

Edited June 24, 2005 by ~G~

[Harmonica]

Evidence:

The ultrasonic infusion and transfusion of CREDIT into the system after the crash in 2000 and starting in 2002 and extending into 2005 to revive the old bullmarket trend is now showing signs of rupture and failure .

Clearly visible in Commodity, stock and metals charts.

Real Estate via the Dow Jones REIT Index has already isssued a topping signal and is currently doing just that.

Failure to take out previous TOPS is abundant, regardless of the country one examines.

The US manufacturing sector is shrinking at a record rate. Delta is nearing bankruptcy, ford and General Motors debt have bben downgraded to junk. IBM is laying off over 10,000 people. Real wages in the US are falling at their fastest rate in 14 years. The price of lumber, which bounced earlier, is now dropping again -- serious ramification for the construction industry.

There's more, a whole lot more. Oh, brother, we're only getting warmed up now.

[Harmonica]

Mmmm food for thought - thanks Harmonica

Hold Cash - any particular currencies?

What about pensions - getting out early is penalised pretty heavily, is it worth putting 'good money after bad' under your predicted scenario?

Don't worry, I am just mulling these thoughts over, and am not necessarily planning to act upon all your advice.  Merely interested in options for avoiding poverty 

Rags

Right now its the Dollar; down the road? don't know. Still expect it to be the $ but will know when the time comes which one to switch to.

Options for avoiding poverty? I like that!

...and what are your views on existing pensions - getting out early is penalised pretty heavily, is it worth putting 'good money after bad' under your predicted scenario?

on existing pensions ... I am well aware of the penalties. What can I say?

You yourself stated that you are mulling over these pieces of info. As time progresses and you yourself determine and confirm that the probability of the depicted scenario is rising due to occurrences in real-time, then that will be the time for YOU to make that decision ....

[Rags]

...and what are your views on existing pensions - getting out early is penalised pretty heavily, is it worth putting 'good money after bad' under your predicted scenario?

<{POST_SNAPBACK}>

on existing pensions ... I am well aware of the penalties. What can I say?

You yourself stated that you are mulling over these pieces of info. As time progresses and you yourself determine and confirm that the probability of the depicted scenario is rising due to occurrences in real-time, then that will be the time for YOU to make that decision ....

<{POST_SNAPBACK}>

Fair enough....I guess my actual question was, if the sh1t hits the fan and deflation occurs on the scale you are suggesting, are the losses on a pension plan likely to be so great as to make the current penalties for early withdrawal seem insignificant...?

....Crystal ball anyone...?

[MattFS218]

how does high energy costs with a oil costing over $60/barrel play into deflation?

[Harmonica]

...and what are your views on existing pensions - getting out early is penalised pretty heavily, is it worth putting 'good money after bad' under your predicted scenario?

on existing pensions ... I am well aware of the penalties. What can I say?

You yourself stated that you are mulling over these pieces of info. As time progresses and you yourself determine and confirm that the probability of the depicted scenario is rising due to occurrences in real-time, then that will be the time for YOU to make that decision ....

Fair enough....I guess my actual question was, if the sh1t hits the fan and deflation occurs on the scale you are suggesting, are the losses on a pension plan likely to be so great as to make the current penalties for early withdrawal seem insignificant...?

....Crystal ball anyone...?

Rags, my apologies; the last thing I want to be is "evasive" ..... so here then is a direct answer to your question (in bold print above) ...... YES !

Bankruptcies will the order of the day and large orgs will be going bellyup by the thousands. Expect the worst, not Armageddon but just shy of it, hehehehe.

That is MY opinion!

[BrissyBoy]

how does high energy costs with a oil costing over $60/barrel play into deflation?

<{POST_SNAPBACK}>

Have been reading a little on this topic and it seems that oil will continue its' rise to about $160 a barrel by the year 2012/14 and then it will rebound to its prior levels of $30-40 a barrel. This has been forecast by elliotwave theory.

This states a period of hyperinflation followed by a spike of oil and then deflation.

Source http://www.321gold.com/editorials/petch/petch112904.html

It won't happen for a few years but we should really start to prepare now.

Hope this helps.