Wall Street legend Robert Prechter argues the biggest risk to the economy is deflation, not inflation


- 4:23 -

Mar 22, 2012

Category: Inflation, Video

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8 Responses to “Is Deflation the Biggest Risk to the Economy?”

  1. MayorQuimby says:

    The biggest risk is excess credit and deficits. If we had no deficits, we could peg aggregate credit levels to gdp output as it should be – and inflation should be pretty much zero percent in perpetuity.

    Trying to enjoy more prosperity than we have earned to the extent that we bend or break every monetary and socio-economic rule in the book will one day have DRASTIC consequences for us all and make moot all of these discussions about inflation or deflation.

    At any rate- inflation isn’t something we have control over. Gvmt cannot set the price. For a short time it can. But not over the long haul. Fiat money is created with collateral and pledges of work. When fiat is just fantasy and there is little backing it, it is already game over for the current system.

  2. willid3 says:

    the only time inflation was ever 0, was during depressions.

    and it always depend on the time line on credit and income (revenue). if you owe 500,000 over 30 years, and you make 350,000 a year, its no big deal.

    and how do we know what prosperity we have earned?

    and inflation existed before FIAT money was created.

    without some inflation we wouldn’t likely to have jobs or businesses.

  3. Simon says:

    Pretcher really needs to switch the t for an a in his name to give people a better idea of where he is coming from. We had deflation in 2007 – 2008. For about three months. It was lovely for those who were short the market or long CDS’s etc. But the fed decided to print money and buy distressed securities. The deflation stopped. The market rose. There has not been any more deflation.

    It’s true deflation is a threat should it occur but the central banks know this and they have the power to prevent it. It’s not a fair system but show me one that is. It’s probable that any system no matter how fair to begin with or how noble its intentions were, eventually will be tweeked so that is can be gamed by it’s administrators.

    There are no perfect answers. It simply a mater of learning the rules and playing hard.

  4. wngoju says:

    For once (!) I agree w/ Prechter

  5. Frilton Miedman says:

    MayorQuimby Says:
    March 23rd, 2012 at 4:54 pm
    “The biggest risk is excess credit and deficits. If we had no deficits, we could peg aggregate credit levels to gdp output as it should be – and inflation should be pretty much zero percent in perpetuity.”

    Pay down debt you say?

    Well, to do that, you need income, revenues.
    ~~~

    MayorQuimby Says:
    March 23rd, 2012 at 4:54 pm

    “Trying to enjoy more prosperity than we have earned to the extent that we bend or break every monetary and socio-economic rule in the book will one day have DRASTIC consequences for us all and make moot all of these discussions about inflation or deflation.”

    That’s some of the ingredients, but baking bread with just one missing ingredient will fail.

    Here are the other ingredients.

    America is the wealthiest country in the world, bar none.

    America also has the greatest spread in wealth disparity of all developed economies, this alone should tell you something.

    Yes, Americans will likely have to downscale living standards, low income families should not be buying $1500 flat screens or BMW’s with home equity loans, HOWEVER…

    In the same respect, A man making $21 million a year (Romney) should be paying a higher rate than 13% while working Americans pay twice that rate., atop blindly claiming his lower tax rates are “job creating” regardless of whether or not he creates jobs. (venture capital is neutral in job creation)

    If corporations claim to be paying the highest rates in the world here, yet many pay no taxes or little at all, there’s a problem, a big one.

    It’s the smaller corporations and businesses who actually pay those rates while the larger corporations pay off Congress to skip town on untold billions of lost revenues…while not even coming close to the levels of job creation their smaller job creating counterparts pay.

    While corporations are hoarding record breaking cash offshore, both the government and middle class Americans simultaneously hold record levels of debt.

    This problem could not be any more obvious, yet the advent of legalized bribery is the only thing standing between Congress and it’s Constitutional obligations as outlined in the “Powers of Congress” section of the Constitution….to tax and to regulate in the best interest of the common welfare of these United States.

  6. Syd says:

    Prechter’s view of what lies ahead this year seems similar to Zulauf”s (as expressed at the beginning of the year) in its gloominess. Right at the end of this piece Prechter says that if you didn’t get out of stocks in ’99 or ’07, now may be your third and final chance. Zulauf also said to avoid stocks this year. Prechter used the word “defaults” and referred to junk bonds and muni bonds, and also referred to gold as a bubble. Zulauf predicted that 1-3 countries would default and leave the Euro this year.

    I don’t know what’s going to happen, but I get the feeling that the global financial system remains extremely fragile.

  7. ilsm says:

    Deflation is one outcome of austerity.

    Good for cash hoarders who have not paid their cash in taxes but lent it to their chequers.

    Jack spratt………………..