Deflation! Us & Europe 2006 Ending 2009!

[Harmonica]

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

It doesn't! -- because it is going to reverse course and start its plunge towards $10-20 in the coming weeks. It will arrive @ this number within a few years. Check the crude Oil thread -- that's where I will post my folly!

I will attempt to call that turn when and if I see it. It is a historical turn and deserves considerable respect.

God help me!

My job of turning lead into gold is indeed quite fatiguing!

[Harmonica]

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

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.

Thanks for that BrissyBoy.

Just my point of view here, nothing more. Make your own evals .....

there are many cats doing elliottwave analysis -- possibly several hundred and many of them have websites where they try to solicit customers thru' bombastic claims of prior success in calling the markets.

I have done my homework in the past w.r.t. to checking a few of these fellas out -- this I did AFTER I completed my own personal study of Elliottwave Analysis Theory myself -- at least to a satisfactory level. I was shocked at some of the utter rubbish I encountered.

As of today, IMHO there is only one authentic site for the real Elliottwave Analysis and that is Robert Prechter's EW International in Atlanta, Georgia.

I don't work for them.

I do my own work but I read Bob's stuff whenever I can -- if I disagree I go with my own work.

[meom]

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

It doesn't! -- because it is going to reverse course and start its plunge towards $10-20 in the coming weeks. It will arrive @ this number within a few years. Check the crude Oil thread -- that's where I will post my folly!

I will attempt to call that turn when and if I see it. It is a historical turn and deserves considerable respect.

God help me!

My job of turning lead into gold is indeed quite fatiguing!

At $10-20 a barrel what would you guess the dollar/euro rate to be?

[Harmonica]

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

It doesn't! -- because it is going to reverse course and start its plunge towards $10-20 in the coming weeks. It will arrive @ this number within a few years. Check the crude Oil thread -- that's where I will post my folly!

I will attempt to call that turn when and if I see it. It is a historical turn and deserves considerable respect.

God help me!

My job of turning lead into gold is indeed quite fatiguing!

At $10-20 a barrel what would you guess the dollar/euro rate to be?

meom,

No correlation visible long-term. Oil prices went up along with a strengthening dollar and continued to go up in 2002, but this time with a weakening dollar.

Take each market in its own light and on its own merit!

[meom]

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

It doesn't! -- because it is going to reverse course and start its plunge towards $10-20 in the coming weeks. It will arrive @ this number within a few years. Check the crude Oil thread -- that's where I will post my folly!

I will attempt to call that turn when and if I see it. It is a historical turn and deserves considerable respect.

God help me!

My job of turning lead into gold is indeed quite fatiguing!

At $10-20 a barrel what would you guess the dollar/euro rate to be?

meom,

No correlation visible long-term. Oil prices went up along with a strengthening dollar and continued to go up in 2002, but this time with a weakening dollar.

Take each market in its own light and on its own merit!

Good advice but I'm interested to know if there is actually a correlation between the oil price and dollar rate.

What would happen if OPEC for whatever reason would abandon the dollar in oil trade and instead would set the price in euros?

[Harmonica]

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

It doesn't! -- because it is going to reverse course and start its plunge towards $10-20 in the coming weeks. It will arrive @ this number within a few years. Check the crude Oil thread -- that's where I will post my folly!

I will attempt to call that turn when and if I see it. It is a historical turn and deserves considerable respect.

God help me!

My job of turning lead into gold is indeed quite fatiguing!

At $10-20 a barrel what would you guess the dollar/euro rate to be?

meom,

No correlation visible long-term. Oil prices went up along with a strengthening dollar and continued to go up in 2002, but this time with a weakening dollar.

Take each market in its own light and on its own merit!

Good advice but I'm interested to know if there is actually a correlation between the oil price and dollar rate.

What would happen if OPEC for whatever reason would abandon the dollar in oil trade and instead would set the price in euros?

I just put together a price history of Crude Oil and USD Index for the last 20 years but am having difficulty posting it due to wireless connection difficulties.

There is clearly very little, if any, correlation between the two.

If interested, will try to post it at a later time or date.

As to OPEC abandoning the $? .... when the $ is in a new uptrend? Likelihood of this event happening? 0.000000000000111234% !

Even arabs have their limitations and I can assure you they will not test the wrath of America.

If I'm wrong on this I will start promoting Chiang Mai as a true paradise as part of my penance!

[quiggs]

I find this quite an interesting subject. The property bubble in the US is problematic, though not nationwide, but, regional....there will be no "burst" nationwide, because of the regional nature of the bubble. Prices may slow nationwide, but, in some areas not much.

I am curious how the Chinese will lead the free world out of depression when their economy (after Yuan is floated and devalued), could drop as much as 40%....sort of like a baby saving a grown man from a burning building, while the child is growing quickly, not THAT quickly.

Actually, I expect some shaky times ahead for the Chinese economy, also, I question their growth figures, (GDP has accumulated 24.7 in growth between 1997 and 2000) and at same time drop energy consumption (Energy consumption had negative growth of 12.8%). Not realistic, however, they are entitled to produce whatever numbers they like. It is just important to take their numbers for what they are.

Generally, it is in everyones interest for the US economy to do well, this is an increasingly global economy, no one economy can falter without effecting the others, including China, but,expecially not the worlds largest by a very large margin.

Which one of these economies can the world do without?

1 World $ 55,500,000,000,000 2004 est.

2 United States $ 11,750,000,000,000 2004 est.

3 European Union $ 11,650,000,000,000 2004 est.

4 China $ 7,262,000,000,000 2004 est.

5 Japan $ 3,745,000,000,000 2004 est.

6 India $ 3,319,000,000,000 2004 est.

7 Germany $ 2,362,000,000,000 2004 est.

8 United Kingdom $ 1,782,000,000,000

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.

<{POST_SNAPBACK}>

[quiggs]

Fastest-growing small companies

From Fortune Small Business: Health care still rules, and oil has come on strong, but this year's unlikely winner is ... manufacturing?

http://money.cnn.com/pf/features/fsb100/

Most jobs in the US economy are not provided by Microsoft and Cisco, but, companies like these. Of these businesses manufacturing is the fastest growing sector in the US economy right now.....

I realize this will not prevent the headlong destruction of the US economy this week,and prevent the US from having to beg for help from Burma but, just thought I would mention.

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.

<{POST_SNAPBACK}>

[~G~]

no one economy can falter without effecting the others, including China, but,expecially not the worlds largest by a very large margin.

China is becoming more and more dependent on its trade partners as its economy grows. there is no turning back at this point, at least not a painless one.

[TizMe]

The political backlash to the economic situation during the "Great Depression" is often blamed for toppling democracies and bringing fascist governments to power in Germany, Italy, and Japan, and ultimately provoking the Second World War. Hitler's rise to power can be directly linked to the profound economic crisis in Germany at that time.

So, are we headed for WWIII, Lead by a fascist govt of U.S.A ?

[quiggs]

This is an interesting supposition. I would think it would be difficult to transition to this sort of government in current times, and with the sort of cultural heritage of liberty that the US prides itself in, allbeit a naive belief as liberties erode there as much as anywhere. It would take dark, dark times, and a very charasmatic leader....something similar to Germany circa 1930's....however, we have the first piece of the puzzle, world opinion against the US...much like germany after WWI.

I think that was a somewhat unique situation in which all of Europe was demanding payment as well, no real independant press, internet....would be tough. Who knows.

The political backlash to the economic situation during the "Great Depression" is often blamed for toppling democracies and bringing fascist governments to power in Germany, Italy, and Japan, and ultimately provoking the Second World War. Hitler's rise to power can be directly linked to the profound economic crisis in Germany at that time.

So, are we headed for WWIII, Lead by a fascist govt of U.S.A ?

<{POST_SNAPBACK}>

[TokyoT]

This is an interesting supposition. I would think it would be difficult to transition to this sort of government in current times, and with the sort of cultural heritage of liberty that the US prides itself in, allbeit a naive belief as liberties erode there as much as anywhere. It would take dark, dark times, and a very charasmatic leader....something similar to Germany circa 1930's....however, we have the first piece of the puzzle, world opinion against the US...much like germany after WWI.

I think that was a somewhat unique situation in which all of Europe was demanding payment as well, no real independant press, internet....would be tough. Who knows.

<{POST_SNAPBACK}>

I agree that it is probably a leap to say that things in the US will change so much politically to allow for a government to be put in place comparable to Germany or Japan in the 1940’s. However, I do not think it is a leap to say the economics at a given time could push governments over the edge and start WWIII.

There has been a significant erosion of liberties and freedoms in the US as a result of 9/11. I am no conspiracy theorist and my views tend to be pretty conservative. But much of what has been pasted on the past view years to help fight terrorism also significantly reduces some of the basic protections provided for by the US Constitution in regard to illegal search and seizure.

Your earlier post goes to show that there are manufacturing jobs available in the US but reality and perception are very different. I think that the general perception right now in the US is that we are loosing well paid manufacturing jobs to lost cost countries like China. Some of this results in very negative perceptions by the general populous in regard to China. If the economy were to go south big time I think we would see strong support for a return to high trade barriers and such (like in the 1920/1930’s). Already there is a basis for support for this type of movement in the groups protesting the free trade moves at all the G-8 meets, and other world trade meetings.

But you also have to consider that a number of other Democracies may not be able to hold on to a core belief in Democracies. Just look thru this form and talk to some of your Thai friends. A number of Thai’s feel things are better for them now than before economically and therefore don’t speak up in regard to government control moves, and then there are other groups who are already disenfranchised with the current level of corruption and feel there is nothing they can do to change things. So I do not think it is a leap to say that Democracies like Thailand could be pushed to become Fascist type states by economic problems.

[Harmonica]

Evidence or weird-ence, more of:

See chart below, courtesy of EWI:

Even with raises in the Fed funds rate long-term rates are not budging. Odd, very odd, indeed!

As the Fed carried out its campaign to raise rates, the Bond Buyers index and the Fannie Mae proxy for 30 year mortgage rates FELL in that time; as for the Bank Rate Credit Monitor's lowest credit card rate, I included it to show that even the rates which have gone up climbed at a slower pace than did the Fed.

So many strange things going on but the bubble just gets bigger, hehehehe.

[The_Moog]

I personally read the signs in a completely different way.

I think we will get chronic inflation.

Driven by:-

- the oil price fuelling higher general prices, leading to wage pressures

- a low interest rate environment due to a a political need to keep asset and property prices afloat.

- High personal debt burdens which can only be repayable if the real level of those debts is eroded by inflation.

-Greater Government spending to pump-prime economies.

I do not believe that PRC's cheap manufacturing base will export enough deflation to counter.

[chownah]

Deflation....not in a serious way and only short term if at all....certainly not catastrophic. As China's economy matures and hundreds of millions of consumers are born the increased pressures on almost all material sources will keep inflation moving right along....sometimes in a problematic way and sometimes as a benign constant. The tech boom/bust cycle that just occured in the US (and elsewhere) did not create disasterous deflation as might be expected...perhaps because.....I would only be guessing if I tried to tell you why the deflation didn't happen...after all I'm just a rice farmer.

[cclub75]

I think we will get chronic inflation.

Driven by:-

-  the oil price fuelling higher general prices, leading to wage pressures

- a low interest rate environment due to a a political need to keep asset and property prices afloat

Right and possible for the US and the UE countries protected by Euro currency... But what about Thailand ?

Thailand can not handle very weak Bath along with high prices of oil... Which will fuel the trade deficit... weakening again the Bath... We know the vicious circle.

So they will have to increase interest rates... And then it will make "pschiiiit" !

Many people will eat the dust because of their debts = economic crisis = less customers = businesses close = unemployment etc.

Thai economy is doomed.

So the scenario from my point of view : inflation from now on to begining of 2006, then "pschiiiiit", buble burst, economic crisis, recession and then deflation.

Or maybe i'm too pessimistic ?

;-)

More seriously : it's amazing all the news we get from thailand about coming hike in prices : fuel again, taxi, private bus, consummer goods, even the highway at Don muang... all the government is trying to do is gaining time... Since january they play that silly game (ok before it was to win the elections in february... well done). But now ? They are shitting in their pants.

But it will be counterproductive : they will miss the "soft landing". Instead, suddendly ALL the business will increase their prices on a very short period of time.

And what about the BOT ? They didn't learn about 97. They continue to provide the people with crap "information" about the trade deficit. They lie about the fact that they support a little bit the THB... Childish. Once again, they will loose.

They have to increase interest rates... But they can not admit it...

You can not compare USA and a small country like Thailand. Thailand can not play around with "fudamentals". Everybody can not wear the suit of Greenspan.

OK i admit that the key is oil price : but who seriously can believe it will decrease in the near future ?

That's why i think the thai economy has gloomy perspectives...

[Harmonica]

OK i admit that the key is oil price : but who seriously can believe it will decrease in the near future ?

I .

[haha]

the value of all material things is based on belief. deflation,and inflation is based on peoples belief.

so, if there is a problem with the way people are looking at things, what should they do?

my suggestion is to get to the root of the problem. ..which is in this case, the large debt that has accummulated over the years in america. these large numbers are influencing many people in a very negative way.

during wwI, germany experienced hyper inflation, people had to pay for things with large volumes of money. the same thing happened in bolivia, and mexico.

so, what to do? simple, change the paper. and after a few generations, everything is ok again. get it?

since the united states was first formed in 1776, most countries have implemented changes in their currency either through regime change, or through an agreed implementation by the existing regime.

since 1776, the united states has yet to do this, so, frankly, it's their turn.

imagine - instead of a debt of 5 trillion, it would only be 5 million. piece of cake to deal with. and would be acceptable to the population.

some would argue that this would shatter peoples confidence in the usa.

hey. germany changed their currency a couple of times in the last century, and look at them now. the same applies to japan.

granted, germany and japan are currently having some problems, but compared to their status after wwII, there is a world of difference.

like I said, it's all about BELIEF. FAITH.

others would argue that the finite supplies of materials will cause inflationery ripples that cannot be avoided. my take on this is - look for alternatives. ok, so alcohol is not as good as oil. big deal. it is plentiful, we can make do. adapt.

the value of materials are all in the mind. so, let's treat it so.

frankly, one of the next steps in the evolution of civilization would be the elimination of currency as is illustrated in the science ficition tv series - star trek. but I don't think we are there yet.

imagine not worrying about money, not worrying about food, enjoying life.

someday this will happen if the human race is able to survive long enough.

but it is not time yet.

we can only dream about it for now.

civilization started as a little village. now, we are at the threshold of globalization. anyone who has analyzed the trend, can see it happening.

yeah. I know. you are saying quote, "this guy has been watching too much star trek."

[Harmonica]

I think we will get chronic inflation.

Driven by:-

-  the oil price fuelling higher general prices, leading to wage pressures

- a low interest rate environment due to a a political need to keep asset and property prices afloat

Right and possible for the US and the UE countries protected by Euro currency... But what about Thailand ?

Thailand can not handle very weak Bath along with high prices of oil... Which will fuel the trade deficit... weakening again the Bath... We know the vicious circle.

So they will have to increase interest rates... And then it will make "pschiiiit" !

Many people will eat the dust because of their debts = economic crisis = less customers = businesses close = unemployment etc.

Thai economy is doomed.

So the scenario from my point of view : inflation from now on to begining of 2006, then "pschiiiiit", buble burst, economic crisis, recession and then deflation.

Or maybe i'm too pessimistic ?

;-)

More seriously : it's amazing all the news we get from thailand about coming hike in prices : fuel again, taxi, private bus, consummer goods, even the highway at Don muang... all the government is trying to do is gaining time... Since january they play that silly game (ok before it was to win the elections in february... well done). But now ? They are shitting in their pants.

But it will be counterproductive : they will miss the "soft landing". Instead, suddendly ALL the business will increase their prices on a very short period of time.

And what about the BOT ? They didn't learn about 97. They continue to provide the people with crap "information" about the trade deficit. They lie about the fact that they support a little bit the THB... Childish. Once again, they will loose.

They have to increase interest rates... But they can not admit it...

You can not compare USA and a small country like Thailand. Thailand can not play around with "fudamentals". Everybody can not wear the suit of Greenspan.

OK i admit that the key is oil price : but who seriously can believe it will decrease in the near future ?

That's why i think the thai economy has gloomy perspectives...

IMHO Thailand will be pulled out of the muck by the second largest economy, Japan when the deflationary fallout from Euroland and USA subsides.

Can't say the same for USA and Europe -- their trend is going to be DOWN for a long, long time.

What I'm getting at is that Thailand might turn out to be the serendipitous location for farangs -- it already has been exactly that for decades and I think it will continue to shine after the next catastrophic fall. That is, it will recover and be propelled by the NEW trend in Asia which, albeit in its infancy, is unmistakeably aborning and will pick up speed in 2010 onwards.

Where will Australia fit in? This is a tricky one given their lack of originality and blindly following their masters stateside -- however my bet is that they will dump America and go Asia bigtime within the next several years.

Yeah, I'm staying put. I love it here and will gladly carry the baton to the finish line if permitted!

Thailand is small, as you say -- but, BIG don't work no more. Maybe small is the answer or perhaps, size don't matter at all! Italians will disagree vehemently!

[haha]

I believe in america.

[The_Moog]

People were singing the 'Deflation' song 3 years ago.....since then, record commodities prices, property prices strong and Stock indices higher.

6 months ago it was the 'Death of the Dollar' song.....well, just see, its stronger against every currency today.

The entrails can be read in many different ways !

[chownah]

................

yeah.  I know.  you are saying quote, "this guy has been watching too much star trek."

<{POST_SNAPBACK}>

Well, in this thread you certainly have gone where noone has gone before!!!

[~G~]

Evidence or weird-ence, more of:

See chart below, courtesy of EWI:

Even with raises in the Fed funds rate long-term rates are not budging.  Odd, very odd, indeed!

As the Fed carried out its campaign to raise rates, the Bond Buyers index and the Fannie Mae proxy for 30 year mortgage rates FELL in that time; as for the Bank Rate Credit Monitor's lowest credit card rate, I included it to show that even the rates which have gone up climbed at a slower pace than did the Fed.

So many strange things going on but the bubble just gets bigger, hehehehe.

<{POST_SNAPBACK}>

Nice One. But the juries require more evidence to reach a unanimous vote.

Do you have any more such candies?

[Harmonica]

Evidence or weird-ence, more of:

See chart below, courtesy of EWI:

Even with raises in the Fed funds rate long-term rates are not budging.  Odd, very odd, indeed!

As the Fed carried out its campaign to raise rates, the Bond Buyers index and the Fannie Mae proxy for 30 year mortgage rates FELL in that time; as for the Bank Rate Credit Monitor's lowest credit card rate, I included it to show that even the rates which have gone up climbed at a slower pace than did the Fed.

So many strange things going on but the bubble just gets bigger, hehehehe.

Nice One. But the juries require more evidence to reach a unanimous vote.

Do you have any more such candies?

There was one such outstanding candy that I remember distinctly saving to a specific folder -- vanished and no search:files/folders beings it forth.

It was about the Transportation sector and what it has gone thru' in 1998 and since and especially, recently.

Lots of fine detail, well researched and cogently explained.

Maybe I'll get lucky and find it. It was really well written.

Others to follow just as soon as I get organized -- just completed a vacation!

[The_Moog]

bubble

This is a misnomer.

Accurate term when its a new asset class - internet shares, the South Sea Company or Dutch tulips.

...but not when its a rise in price in an established asset class. The price has gone up. Maybe it will come down again, but there are benchmarks to establish value.

Bubbles are characterized by a lack of data to price properly a new instument. Thats why internet shares used to be priced on daft things like their number of hits multiplied by advertising % growth, (as there was no trailing EPS)

[Harmonica]

I personally read the signs in a completely different way.

I think we will get chronic inflation.

Driven by:-

-  the oil price fuelling higher general prices, leading to wage pressures

- a low interest rate environment due to a a political need to keep asset and property prices afloat.

- High personal debt burdens which can only be repayable if the real level of those debts is eroded by inflation.

-Greater Government spending to pump-prime economies.

I do not believe that PRC's cheap manufacturing base will export enough deflation to counter.

Those who think that we will be getting more Inflation ought to take a close look at the following chart (below)

The only real growth sectors of the economy have been in financial activities, and, especially, in construction. Consider what this chart -- which appeared in The Economist magazine earlier this year -- says about housing and inflation.

Notice most of all the true direction of the longer-term trend in core inflation , namely downward . As for the rate that includes house prices, the influence of the real estate bubble speaks for itself.

[Harmonica]

bubble

This is a misnomer.

Accurate term when its a new asset class - internet shares, the South Sea Company or Dutch tulips.

...but not when its a rise in price in an established asset class. The price has gone up. Maybe it will come down again, but there are benchmarks to establish value.

Bubbles are characterized by a lack of data to price properly a new instument. Thats why internet shares used to be priced on daft things like their number of hits multiplied by advertising % growth, (as there was no trailing EPS)

Your theory will be severely tested within the next few years -- the stock market bubble of the 1920's era is repeating -- or let's just say, if it repeats

But just to offer a different point of view -- a bubble characterizes a wanton and obscene disregard for actual underlying value (true value based on fundamentals) and relies for its sustenance on the GREATER FOOL THEORY to propagate and multiply! Some of this is already occurring in the latter stages of a bullmarket, but for it to be a bubble we are stressing "outrageous valuations" and the "greater fool theory" to the utmost, which itself as a concept will be severely tested.

I wrote that fast -- it might not make any sense. I'm going for a run!

[~G~]

I personally read the signs in a completely different way.

I think we will get chronic inflation.

Driven by:-

-  the oil price fuelling higher general prices, leading to wage pressures

- a low interest rate environment due to a a political need to keep asset and property prices afloat.

- High personal debt burdens which can only be repayable if the real level of those debts is eroded by inflation.

-Greater Government spending to pump-prime economies.

I do not believe that PRC's cheap manufacturing base will export enough deflation to counter.

<{POST_SNAPBACK}>

Those who think that we will be getting more Inflation ought to take a close look at the following chart (below)

The only real growth sectors of the economy have been in financial activities, and, especially, in construction. Consider what this chart -- which appeared in The Economist magazine earlier this year -- says about housing and inflation.

Notice most of all the true direction of the longer-term trend in core inflation , namely downward . As for the rate that includes house prices, the influence of the real estate bubble speaks for itself.

<{POST_SNAPBACK}>

Bubble of construction, financed by growing debts... so - where is the point in which credit drops? What are the conditions that will no longer allow it to stretch any more?

[BrissyBoy]

Harmonica before I thought we would not see deflation but rather the opposite, cronic inflation.

Now with terrorist attacks on London I believe you may indeed be right.

Correct me if I am wrong but I believe this will lead to a drop in consumer confidence around the world. This in turn will see drops in production and then a flow on effect on income. But we will still need to pay back outstanding debt with the housing buble in quite a few countries. Property prices will fall as defaults rise. Deflation will follow.

I hope I am wrong but it is better to be prepared then not.

[cclub75]

Harmonica before I thought we would not see deflation but rather the opposite, cronic inflation. 

Now with terrorist attacks on London I believe you may indeed be right.

I think that you go a little too fast by linking those two issues.

Remember : terrorist attack in Madrid last year, exactly the same pattern, even worse regarding the death toll. Effect ?

We can say : "zero". The economic situation in Spain is much better than France, Germany etc.

It's sad, but we have to aknowledge that these "islamic hyper terrorist attacks" are now... part of the landscape. There will be much more to come (my bet : in one year exactly, in Italy just before the general elections, Berlusconi will fall exactly like Aznar did in Spain last year)...

But still, I agree overhall : large economic crisis ahead of us.