Inflation.??? Not to Worry.!!!
Yeah, it’s rising.
Yeah, it’s like tripled in the last year.
And yeah, it’s the highest it’s been in 40 years.
it’s not 1974, when it was 11%.
Or 1980, when it was just over 13.5%.
(notice all the “deflation periods right after higher inflation)
And we’re not Venezuela, where it hit over 65,000% in 2018,
that’s right, 65,374% per year.
In 2019 it was almost 10,000%.
That’s 190% per WEEK.!!! (simple average)
(the line that lies on the bottom of the chart is still between 12 and 60 % )
So, first off, 7% is relative – not good, but, not that bad, either.
You could be living in Caracas.
The glass is half full. Be thankful.
This segues me into a second facet of why not to worry.
Inflation isn’t what one should be worried about.
It’s not the Big Bad Wolf.
I believe Deflation is right around the corner.
- right after the Crash and the Great Depression II.
(but that’s an article for another time)
Deflation is your Big Bad Wolf.
And I can’t help but be amused about everyone’s grumbling and stressing out about a rise from a meager 2.5-3%, to a 7% inflation rate.
Which is the one big reason for this Op-Ed book review.
And why I decided to reread Robert Prechter’s book ----
Conquer the Crash -
You Can Survive and Prosper in the Deflationary Depression
I have 2 editions, the 2009 and 2014 editions. The original was first printed in 2002. There is a fourth one that came out in 2020. I have it on order.
The timing of these various editions coincides w/ dynamic updates of the analysis of the Elliott Wave count.
The following is curated from Chapter 9, Book One, with my own commentary interspersed.
Quotes from the book are italicized.
They are in Arial font, and in quotes.
My words are in Times New Roman font, no quotes, and not italicized.
I’ve “curated” as much as I could legally – EWI graciously says I can quote up to 500 words from the book, as long as I credit the book and let them know I did an Op-Ed/book review, which I have done.
Book One Part II Chapter 9 - When Does Deflation Occur?
Inflation is an increase in the ‘volume’ of money and credit,
relative to available goods.”
When this happens, “the relative value of each unit of money falls, making prices for goods generally rise.”
“Though many people find it difficult to do, the proper way to conceive of these changes is that the value of units of money is rising and falling, not the values of goods.”
“The most common misunderstanding about inflation and deflation - … - is that inflation is (simply) rising prices and deflation is (simply) falling prices.
These “general price changes,” . . . “are simply ‘effects’.”
“Deflation is a ‘contraction’ in the volume (etc. etc.) . . .”.
Everything from above is reversed.
“Deflation requires a precondition: a major societal buildup in the extension of credit (and its flipside, the assumption of debt.)
--- U.S. debt.
And its twin, the S + P 500 stock market ---
If the present isn’t an historic buildup of credit,
then I’m “the King of Hearts”. Or maybe “the Queen of England”.
However, nothing goes “vertical” forever.!!!
See pages 80 & 81.!!!!! There you will find historic examples of “verticals”
and their ensuing “mirror images”. DOWN.!!!!!
Chapter 9 continues.
"After reading a history of major U.S. depressions
from 1830 and on,
Elliott Wave expert Hamilton Bolton summarized his studies: (1957)."
Two of the more notable points (I thought) were:
“All (depressions) were set off by a deflation of excess credit. This was the one factor in common.”
(d) “None was ever quite like the last, so that the public was always fooled thereby.”
There were five more, but, I’ll leave them for the reader to investigate.
The book continues,
“A trend of credit expansion has two components”
the … general willingness to lend and borrow, and the … ability of borrowers to pay interest and principal..”
“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.”
“These … (2 components) … depend on (1), … the trend of people’s confidence, i.e., creditors and debtors think (they) … will be able to (re)pay.
And (2), the trend of production, which makes It easier in actuality for debtors to (re)pay.”
“When the social mood trend changes from optimism to pessimism, creditors, debtors, producers and consumers change their primary orientation from expansion to conservation.”
“A downward ‘spiral’ begins.”
“The resulting cascade of debt liquidation is a deflationary crash.”
This is a good chunk of what I consider to be
the main thrust of Chapter 9.
It ends with this paragraph -
“A Global Story”
“The next four chapters ( Chapters 10, 11, 12, & 13 ) present a discussion that will allow you to understand today’s money and credit situation and why deflation is due.”
This is a great place to leave it to the reader to pursue the rest of the book on his/her own.
I am not compensated in any way if you buy the book.
Regarding my review of the book - I found it extremely interesting, highly informative, and very thought-provoking.
The beginning of “Chapter 10 - Money, Credit, and the Federal Reserve Banking System” says –
“This is a difficult chapter, but if you can assimilate what it says, you will have knowledge of the banking system that not one person in 10,000 has.”
Pretty heady words."
The layout is beautifully designed for ease of consumption.
Two books –
“Book One: WHY A STOCK MARKET CRASH, MONETARY DEFLATION AND ECONOMIC DEPRESSION ARE LIKELY TO OCCUR SOON
Part I: The Case for Crash and Depression”
“Part II: The Case for Deflation”
Five chapters -- one of which is the curated Chapter 9 above.
“Book Two: HOW TO PROTECT YOURSELF AND PROFIT FROM DEFLATION AND DEPRESSION
21 chapters -- a ton of information –
the title pretty well says it all.
You won’t want for information.
Lots of charts and visuals. I like visuals. They’re a great aid & tool of any “reading”.
It’s Book Two that’s the “clincher”!
This treatise does not just spell out what the author calculates is coming, and leave it at that. Book Two gives you solutions, remedies,
“Do’s and Don’ts, and more.
And, what to do when it’s all over.
Hopefully, I’ve piqued your interest. It’s definitely worth your time – assuming you apply what you’ve learned. Even if you don’t apply it,
no one will be able to take from you all the knowledge you’ve gained.