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Deflation Will Take the Majority by Surprise

By Elliott Wave International

The last thing on the minds of most people is deflation. It’s easy enough to determine that with a quick quiz — and that quiz is found in the just-published Elliott Wave Theorist.

In this July-August Theorist, Robert Prechter uses Google searches to make a point about deflation:

"When I typed ‘Inflation for 2013,’ there were 47,700 results. On March 13th, when I put this slide together, I also typed in "Deflation for 2013." How many results do you think I got?"

Prechter reveals that the answer is 5. (You could have googled it yourself, but we don’t want you to have to take the time.) He then goes on to search other phrases pertaining to deflation and inflation, which you can learn more about via a risk-free read of the Theorist. Just know that the number of Google searches for "Deflation for 2013" was nowhere near the number of searches for "Inflation for 2013."


Get a FREE 2-page sample of Robert Prechter’s Elliott Wave Theorist.


Yet, consider that the state of the economy remains precarious. For one thing, Detroit just became the largest American city ever to file for bankruptcy. But that’s not the half of it.

An MSN Money article points out that municipal financial problems extend far beyond Detroit to cities like Chicago, Newark, New Haven, Baltimore and Louisville:

10 cities selling stuff to get by

When your finances are in trouble, sometimes you have to unload precious items to survive. For some cities, that means parting with sailboats, landmark buildings and even Santa Claus. (MSN Money, July 22)

Here’s some irony: Almost no one expects deflation, yet consider this June 14 Marketplace.org headline: "Millennials face uncertain future with part-time work." In other words, many young adults want full-time jobs but can find only part-time positions. This employment scenario is more in line with economic contraction than expansion.

This contrast between reality and the apparent lack of concern about deflation can be seen most remarkably in Europe:

Eurozone business still going backwards (CNNMoney, May 23, 2013)

This article quotes a market firm’s chief economist, "Weakness remains broad-based, with Germany stagnating, France contracting steeply and the rest of the region also clearly entrenched in an ongoing downturn of worrying severity."

But this CNNMoney article barely scratches the surface of why Europeans and U.S. citizens alike should prepare for the most devastating of all financial trends — deflation.

In a recent Theorist, Prechter writes: "Deflation nearly always manifests as a contraction in the amount of outstanding debt. Let’s look at where we are in terms of debt in Europe and the United States. …"

See what Prechter presents to subscribers of The Elliott Wave Theorist with no obligation for 30 days. The just-published September issue is packed with insights you won’t see anywhere else. Preview what’s inside and learn how to get your risk-free review.


This article was syndicated by Elliott Wave International and was originally published under the headline Deflation Will Take the Majority by Surprise. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

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