Inflation/Deflation

In the coming years, Europe appears set to lurch from the frying pan of depression to the fire of high inflation. When it does, the lessons of the Great Inflation [outlined in this article] will suddenly be all too pertinent.

There is very little evidence of high inflation at present, despite what the hyperinflationists say, and a little bit of common sense totally debunks the idea that there is.

With stocks at record highs and the U.S. economy improving, the European debt crisis seems like a distant memory....[While] Europe is no longer the market’s focal point, however, that doesn’t mean the euro zone’s financial problems have gone away.

What does it look like when a 30 year bull market ends abruptly? What happens when bond yields start doing things that they haven't done in 50 years? If your answer to those questions involves the word "slaughter", you are probably on the right track. Right now, bonds are being absolutely slaughtered, and this is only just the beginning. So why should the average American care about this?

The global financial system is potentially heading for massive amounts of trouble if interest rates continue to soar. So what does all this mean exactly? [Let me explain.]

Despite the Fed’s recent communications that they are planning to “taper” the current monetary program by the end of this year – the index is suggesting that their interventions, in one form or another, are unlikely to end anytime soon. The threat of “deflation” remains the Fed’s primary concern.

Are we headed for rampant inflation or crippling deflation? I believe that we will see both. The next major financial panic will cause a substantial deflationary wave first, and after that we will see unprecedented inflation as the central bankers and our politicians respond to the financial crisis. [Let me explain why I think that will unfold.] Words: 1025 Charts: 3

Out of control spending by a government is always the cause of hyperinflation. The debt ceiling had been the last remaining roadblock to unlimited federal government spending. By suspending the debt ceiling, the U.S. government has given itself a blank cheque, taking one giant leap down the road leading to the hyperinflation of the US dollar. Words: 632

At some point we are going to see another wave of panic hit the financial markets like we saw back in 2008. The false stock market bubble will burst, major banks will fail and the financial system will implode. It could unfold something like this: Words: 660

We had previously speculated that the 30-year bond rate would continue downward to around 2% based upon a number of very long-term charts. Short-term charts, however, are showing strong technical evidence that interest rates may be turning up in the long term. Words: 267; Charts: 2