Deflation: What it is, why it’s coming and what to do about it

There’s a world of difference between positive thinking and delusion.

Healthy positive thinking says: “Let’s put our energy into productive activity and let’s meet setbacks with equanimity, learn from them, and work to turn them around.”

Delusion says: “I won’t want to hear or think about anything that’s not rosy and cheerful and is not accompanied by rainbows and unicorns.”

If you’re into delusion, you’re not going to like what follows.

I pay close attention to the financial markets. I have been since I was 12 years old. (Hopefully, I’ve grown in sophistication a little in the last 40 years.)

Along the way, I had a brief stint on Wall Street and got to see first hand how things work “behind the curtain.”

I’ve also had lots of opportunities to see how unreliable the news media and other experts are when it comes to identifying major trends.

Take the Internet for example, something near and dear to all of our hearts.

Computer industry people (including many “leaders” in the digital media world) were very negative about the prospects of the Internet from 1993 to 1995. Then they became wildly and overly “optimistic” (i.e. delusional) from 1995 to 2001. Then they threw the baby out with the bath water from 2001 to 2004 and declared the industry “dead.” Now, of course, they’re selling everyone on social media as the road to easy riches.

In other words, the media experts were wrong about the Internet industry every step of the way.

And today they are, in my opinion, wrong – and dangerously wrong – about the state of the financial system.

I don’t know how to condense hundreds (thousands?) of hours of research, reading and study into a single blog post, but if ever there were a time to focus on this, now is the time.

Here are two very recent radio programs by two people who: a) can count, b) are immune to news media baloney and c) are willing to do the very heavy lifting of telling it like it is.

The first comments are from Karl Denninger, a former Internet entrepreneur (ISP) and now full time trader and commentator.

Denninger was one of the original founders of the Tea Party. He dropped out a month later when it became painfully obvious to him that the movement had been taken over by Republican Party hacks.

(The original purpose of the Tea Party was to call attention to and take action against massive frauds taking place on Wall Street that were being aided by the White House and Congress. Now Tea Party-elected “leaders” in Congress are among the leading enablers of Wall Street fraud thanks to well distributed campaign contributions.)

The second comments are from Richard Martin who is a financial advisor based in Singapore. I know less about his background, but he is consistently accurate and rigorous in analysis.

The issue is Deflation…

What is Deflation? Why is it coming? What will it look like? And what to do about it?

No one can predict the future, but deflation is at least as likely a scenario as the CNBS baloney that “recovery is right around the corner” and unlike the CNBS clowns, these two analysts have the numbers to back up their projections.

Last thought…

No one in the financial industry – not the news media, not the brokers, not the gold and silver dealers – can make money from a “deflation is coming” story. Therefore, they don’t tell it. And not only do they not tell it, they all but bar the mention of the word.

Read the previous sentence a few times so that it really sinks in.

Here’s the other side of the financial story. The one no one is talking about. The one you should be, at the very least, aware of.

Karl Denninger from “The Ticker Guy” – June 4, 2012


Richard Martin from “The Wake Up Call” – June 4, 2012


For ongoing information about the state of the financial system: Visit Real Econ TV

– Ken McCarthy

P.S. For over 25 years I’ve been sharing the simple but powerful things that matter in business with my clients.

If you’d like direction for your business that will work today, tomorrow and twenty years from now, visit us at the System Club.

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