Deflation Coming (with vengeance) in 2014!

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The vast majority of pundits seem to think that hyper-inflation is emerging down the road. I say nonsense! What is emerging now is Deflation for 2014 and beyond. Our current bubble economy has not created any hyper-inflation and all the QE has not created any inflation or hyper-inflation (with minor exceptions in key commodities such as oil and oil derivatives). So what is happening and why? What the vast majority of pundits miss IMO is the nature of our monetary system today. Money units are NOT getting to the Consumer (which represents some 70% of our economy). The Consumer is living from pay check to pay check with little or NO increase in purchasing power. Wages are going down for some 91 million unemployed and under employed. This vast number of Consumers are not enjoying an advance in their purchasing power. The key to more inflation and hyper-inflation is more money units for the average Consumer. This is NOT happening! This is unlikely to happen!

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Gold is a leading indicator of the DEFLATION that is coming! After the coming crash in our stock/bond markets, a reversal in the price of gold and silver is very likely. These metals are the FOUNDATION of our Western monetary system!

The Fed has been increasing digital dollar units in the trillions, yet there is NO real inflation in the general economy. Yes, I can pick out select items which have experienced ‘inflating’ (which I call select price increases). This is not going to lead to any hyper-inflation down the road. The probability is that once the stock market crashes (most likely in the next few months) our imaginary money units (digital dollars) will start to collapse ‘values’ of most ASSETS (real estate, autos, durables, etc.). As ‘values’ start to collapse (disappear into money heaven), this process will overwhelm the markets and cause DEFLATION. Value destruction happens when confidence in the general economy wanes and disappears. Bubble economies (as now) can not last when confidence wanes and negative emotions emerge. This trend is starting NOW and is likely to increase substantially in 2014. Watch!

The coming CYCLE of deflation starts slowly and gathers momentum over time. Watch the above cycle unfold starting in 2014 and after!

What has emerged in the past 20 years is a robotic economy for most goods. Goods can now be produced by robots and machines at levels never before possible. Computer technology and robotic technology has created markets where supply can overwhelm demand (in most goods). Exceptions would be food and many consumable items from the agricultural sectors. These goods are subject to the vagaries of the weather and also the continuing DEMAND from consumers (for survival). We could witness sharp increases in prices of select food items if farmers are unable to produce sufficient supplies. This factor, however, will not (by itself) create hyper-inflation. A major economic Depression is coming and ‘value’ destruction (deflation) is more likely than any type of real hyper-inflation (especially in our Western economies).

When the Bubble pops or gets pricked then ‘value’ destruction emerges with a vengeance! This is coming in 2014 IMO!

All the vast dollar surpluses now held by China, Japan, and Germany could distort select markets if these funds are deployed into select commodities (such as gold, silver, and select base metals). This deployment, however, does not mean hyper-inflation for the general markets. To create any meaningful hyper-inflation the Fed and the other Central Banks would need to start PRINTING currency units (paper notes and similar for the general consumers). Digital currencies tend to remain within the Computer Screens of most recipients and do not get to the Consumer (in sufficient supply to create hyper-inflation). Theoretically, it is possible to have hyper-inflation with digital currencies (such as our dollar) if Congress were to vote a general distribution to the Consumer (say a huge tax give-away). I do not expect this event, however, as our Congress is mostly bankrupt.

After the coming stock/bond market crashes, then we will witness a huge BUBBLE in the price of gold/silver! We could witness the beginning of this trend soon!

Most of our political leaders are now aware that our DEBT is unpayable and hyper-inflation will not cure our DEBT problem. Our current money units are created as ‘debt’ units and there is NO solution to our DEBT problem via hyper-inflation. The ONLY solution to DEBT is liquidating this ‘imaginary’ DEBT. The market will do this for us via VALUE DESTRUCTION over time. What we need to understand is that ‘money’ is a proxy for VALUE. Value is a subjective concept within our Consciousness. Value disappears when confidence disappears and when Consumers flee the credit markets. This has not happened since the GREAT DEPRESSION era of 1929-1937. I now sense that this emotion (a lack of confidence) is emerging with a vengeance. This means that ‘value’ destruction is coming and DEFLATION is coming in 2014 and after. Watch the markets for signs of WHEN!

A Debt collapse in bonds, real estate, derivatives, and other paper (digital) assets means that dollars disappear into ‘money heaven’! Most of our currencies today are VIRTUAL (imaginary) and we witness these units within our Computer Screens as no-thing units!

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Food, gold, silver, and items which tend to retain ‘value’ in a new market where confidence is declining should be viable alternatives for 2014 and later. Now is the time to get prepared for ‘heavy’ WAVES (my old Navy saying)…as a financial storm is brewing over the horizon. Those who prepare now should weather this storm. Many, however, may not survive the coming difficult YEARS. Do your own thinking on these issues! My view is a result of my thinking! Enjoy! I am:  http://kingdomecon.wordpress.com

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avatarDon Swenson - Kingdom Economics posted Tuesday, December 3rd, 2013.

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