Industry News

Economic Downward Spiral: The Next Big Wave of Deflation is Upon Us

Surfersvillage Global Surf News, 10 July, 2010 : - - It looks like the next big wave of deflation is upon us. Looking at some key fundamentals, we see the labor market is again shredding jobs (652,000 in June), the money supply is contracting at levels not seen since the Great Depression and the US Federal Governments finances are in complete disaster.

We stand on unbelievably shaky ground right now and this time around there isn’t any room for another massive fiscal stimulus from a soon to be impotent Federal Reserve. It appears that a good amount of mainstream economists and financial journalists are finally recognizing that the worst may still be to come.

Let us be honest. The US is still trapped in depression a full 18 months into zero interest rates, quantitative easing (QE), and fiscal stimulus that has pushed the budget deficit above 10pc of GDP.

As we watch the various stock indexes begin their slow and inevitable decline, it appears that no amount of monetary stimulus or meddling from the Fed can stop the next leg down. Liquidity is rapidly fleeing the financial system. Again, as Pritchard notes, money market funds declined 37% in the month of May, something that has never happened before. 

Although the Federal Reserve no longer publishes the total money supply figure (M3), many well respected economists including John Williams of Shadowstats, reconfigure the data based on previously used computation methods. For the three month period ending in April, the money supply in the US (M3) fell at what amounted to a 9.6% annually, something not seen since the Great Depression.

As the money dries up from the stimulus driven “economic recovery” of 2009, it appears 2010 will be marred by another round of credit contraction. As it always has been, it appears gold and silver are the only legitimate places to park your money as we prepare for the next leg down.  

Read the full article by Michael Schmidt at GlobalResearch

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Michael Schmidt

Industry - Surfersvillage