The question continues: Will it be inflation or deflation?
Actually, the real question is: Will it be hyperinflation or deflation?
When such illustrious proponents of hyperinflation such as Marc Faber, Peter Schiff, and even the venerable Warren Buffett seize the microphone and take such a convincing position, it is very difficult for a deflationist such as myself to compete and put forth my point of view.
It’s not that my arguments don’t hold water, because they most assuredly do. Just consider the facts which include the dramatic decline in the velocity of money, the almost total absence of lending and borrowing, and the continual reduction in economic structural pricing.
These details give the case for deflation a very solid platform. Regrettably, the personalities, reputations, and panache of Faber, Schiff, and Buffett, seem to overwhelm even the most rock-solid of rebuttals.
Therefore, I thought it was time to bring out the big gun, my daughter Nicole. No, I did not want her to explain that rising and falling prices are neither inflationary nor deflationary but simply byproducts of each, rather, I wanted Nicole to explain why deflation is the most feared of the “-tions” from the perspective of those who ultimately drive this economy, the end consumer. According to her, it’s very simple.
If Nicole believes prices will be lower tomorrow than today, she will wait to buy.
It’s no more complicated than that.
For over twenty years, Japan has experienced what my daughter and every other shopper has engrained in their soul.
It’s called wholesale vs. retail.
For a strong dose of reality, Faber, Schiff, and Buffett need to observe how the world is shopping.
The widespread belief that you could pay less money tomorrow than today is precisely why sales, production, employment, and increased wages will screech to a grinding halt.
No amount of liquidity, credit, or printing of money will help if people believe the bargain is just around the corner.
Consumers will simply wait.
With a further understanding of this straightforward concept, the legends will start to see things my way.
By bringing out my big gun, I knew they didn’t stand a chance.Sorry boys!
Along with his 40-years of dedication in the financial services industry, Bill is the President and CEO of GPSforLife, has recently authored a highly successful book entitled 44th: A Presidential Conspiracy, publishes his dynamic monthly financial newsletter MacroProfit, and faithfully continues his third decade on the radio with It’s All About Money, which can be heard weekdays on Money Radio in Phoenix and in podcast form on his website (and on smartphone apps) published at billtatro.com weekdays at 5pm Eastern. Bill can be reached via email at email@example.com and on Twitter @tatroshow.