The Forecast: The formula is a simple one: Too much product is flooding the global marketplace, and there’s a chronic shortage of people with enough money to buy those products. Price wars will mark a new age of retail marketing. Who will be the winners and losers? And even as commodity prices decline in many sectors, the cost of living will continue to escalate. Thus, despite deflation, it will feel like depression for many.
Update: From China to Europe, to the International Monetary Fund and Federal Reserve, the blame game foisted on the public by central bankers and government shills is that deflation is bad, inflation is good. The fairy tale they keep selling is that deflating prices stop consumers from buying goods because they are waiting for prices to sink lower. With a good dose of inflation, their story goes, consumers will rush out on a shopping spree and boost the economy.
There is neither economic precedence nor empirical data to support this assumption. They made it up! Deflation — falling prices — is a simple supply-and-demand issue built on too much product and not enough demand. As demand declines, prices drop. And the reason for deflation is simple: The once-upon-a-time “shop until you drop” consumers of previous generations literally and figuratively have dropped dead. Left with little money to burn, vast majorities of today’s cash-strapped and/or deep-in-debt consumers can barely make ends meet. For example, in the “exceptional” US, median household income is below 2000 levels and student college debt, at some $1.2 trillion (an average $35,000 per student), is greater than credit-card debt.
In July, the IMF forecast that 2015 will be the worst year for global economic growth since 2009. Every product, consumer or otherwise, starts with raw materials. And as economies around the world decline, industrial commodities — copper, nickel, aluminum, crude oil — are down and diving. Example: Iron ore, a steel-making ingredient, hit a high of $191 a metric ton in 2011. It’s now selling at about $50, a 10-year low by updates and action steps to consider.