Thursday, February 25, 2016

Are we Headed Towards a Massive Deflation Event?

Most blog articles here are by design fairly brief articles that touch on articles or events that relate to the kind of major monetary system change we watch for here. It's simply not possible to do in depth on these issues in most blog articles.


In this case we have an hour long discussion on video between Mike Maloney and Jim Dent on the topic of a coming reset to the system that they both see coming. This discussion is worthwhile to listen to because while they agree on a coming major deflation event, they debate the issue of whether or not precious metals will be viewed by the public as a safe haven during such an event. 

It's a theoretical discussion/debate, but both of them are well versed in the arguments for their point of view and present historical data and logical reasoning to support their views. We don't claim here to be able to predict future events, but we do present a variety of views that we see when we feel they are well presented as is the case with this video.



Covered in this discussion:

- a look back into the history of boom and bust cycles that lead to major sea change events

- both participants see a massive deflation cycle coming in the next five years (by 2020)

- an explanation of why the see this coming based on demographics in the developed nations and historical precedents

- a debate on whether or not precious metals will be viewed as a "safe haven" asset in a deflation event (interestingly both eventually see much higher gold prices even if they fall during the deflation event)

- could the US end up like Japan with a decade or two of low growth instead of a  major crisis event that clears debt from the system so a reset can begin?

- practical suggestions for the average person to prepare for a major deflation event should we experience one

As an additional footnote, many precious metals advocates agree with the idea of a coming crisis based on too much debt in existence. The debate they would have with Harry Dent is that they believe the central banks of the world would be proactive to take action in advance of a major deflation event (even more QE and helicopter money for example). They feel these actions would create high inflation or even hyperinflation causing the value of precious metals to go sharply higher instead of falling as Harry Dent expects. Harry Dent explains his side of that debate in this video discussion.

At the end of the day most all of those expecting another big crisis agree that what will cause such a crisis is a world over extended with too much debt and related derivatives products (too much additional leverage in the system). They all pretty much expect some kind of debt liquidation phase and another round of an inflation phase. Where they differ is on the timing and order of those events and how central banks might respond to the crisis (or if they can respond to the crisis). Of course the alternative view is that no crisis is forthcoming any time soon.

Our suggestion here is to take the potential for another major crisis at some point in the next five years seriously, stay informed, and develop a backup plan to deal with such a crisis if one arrives. This will vary for each person and family depending on their situation.

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