Robert Prechter on Deleveraging Deflation 2010 (4 of 5)

[reef37]

I own some gold - but I do not agree with a gold back monetary system. The rich and elites have all the gold so nothing in the class structure will change. I don't think the rich should have to give up there riches - it should just be a new even playing field where all classes have the same investment and wealth building opportunities. If the same people are at the top then what has changed.... BE TO WORK ON MONDAY AND BUY SOMETHING ON THE WAY HOME :)

[TheBullBearReport]

For a bullish view using Elliott Wave visit w w w , TheBullBear . c o m

[artamatra]

Willem of Orange is dutch

[nteowl2025]

But if the powers-that-be give the illusion that there is a growing economy than gold will continue its 5th wave all the while the dollar goes up at the same time because of the demand for cash. Look at the cash for gold stores popping up; not until the shoe shine boy or the guy at jimmy john's is saving up for gold dust specs is when to sell at the ultimate top. If it goes down to 500 buy as much as you can!

[MarcusCMarcellus]

I think you are right. Where I disagree is that the deflationary period - and the bear market rally that started a year ago today - will go on longer than we expect. I posted some videos in Sept. 2009 that argued the rally would continue for some time & the gold bugs/Austrians slammed it based on their own fundamentals. Sovereign debt is next=more deflation even as they inflate out. The markets are also political events, especially under Obama-Brown-EU. In the end, though, you are right.

[dannydarias1]

@nteowl2025 Believe me, you will not be buying anything. Most people will be hating gold at that level.

[herbs814]

"There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as the final and total catastrophe of the currency involved." Ludwig von Mises, 1949

[aardvaark069]

So let me get this straight.....from 1980 to 2000 was a time of recession/depression according to this gold chart?....I ain't convinced yet.

[tesskansas]

A qualifier was used. He said "most" of the time.

[mlndstream]

MarcusCMarcellus,something I have a problem understanding is could treasury debt default during serious deflation?and if so,then couldn't the currency that debt is denominated in hyperinflate as a result since I have read that its faith in the govt to repay it's debts that backs that currency.But at the same time,I have been thinking that if deflation is serious,then there could be a rush into treasuries,pushing down interest rates making them very easy to service so reducing risk of default?

[MarcusCMarcellus]

@mlndstream

I think the second scenario is correct in part because deflation will take the market down with it, shifting more $ into treasuries. I think this is partly why the Fed has eased off M3 money supply. The Fed is still a bank, and hyperinflation would make its own assets worth less, not just its debts. They are walking a tight rope between keeping rates low and printing but also not flooding the market with $. Massive deflationary pressure (debt defaults) still exist.

[mlndstream]

Could it be possible that the private owners of the Fed have plans up their sleeves that could bring them more wealth by allowing the currency to collapse than by keeping it strong? I mean they must know that all currencies end one day,even if only to be replaced by another, so I'm sure they would have a plan to deal with it in a manner that was profitable for them?Perhaps selling their gold stores into a panicking market, only to buy it back cheap after a stable currency has been circulated?

[mlndstream]

There's so much more credit out there than actual currency, that any contraction in that credit(which is also part of the money supply) could make the currency highly demanded as all those debtors demand cash to service debt at the same time.Treasuries would then be highly demanded driving down interest rates reducing risk of default, while providing the govt plenty of money to spend as everyone rush's to invest it with them?

[mlndstream]

On the other hand, wouldn't it be true that during a severe deflation, the monetary supply could be so reduced that the Govt may not be able to get it's hands on enough money to pay out Debt that is reaching maturity? and that this could be a problem rather than interest rates since if everyone piles into treasuries the interest should be extremely low anyway

[nteowl2025]

Yes, and they are not bailing out everybody just the big wigs and their best friends. We still have an empty credit card with the IMF before hyperinflation is a thought. Any inflation experienced between now and 2012 will be an engineered purge to give the illusion Obamanomics works just in time for re-eleciton.. The machine lives on!

[SergLLLL]

I agree with you. I love Peter Schiff as a president or at least to replace helicopter Ben, but he screwed up with the $. He kept pushing Gold even when there was 97% bulls on Gold and 97% Bears on the ndollar.

I am afraid people will lose a lot of money on Gold.

I am not sure I like the Peter Schiff - the trader. But Prechtor is a demagogue and a lier! He claims he predicted the March lows and this leg up. A lie! All he said is to cover short 1 week before the bottom in March.

[SergLLLL]

Rubish. The guy is a joke! For almost 6 months Prechter is talking about S&P500 400. Where is it?

[MarcusCMarcellus]

I do not post these videos because I necessarily endorse Prechter's recommendations but because his discussion is learned and interesting. I also post Marc Faber and others. Peter Schiff has been talking about inflation and decoupling for years - no sign of it here. In fact, anyone who listened to Schiff's advice lost a huge trading opportunity in 2009. And now he's telling people to jump into China? Prechter offers an argument for deflation worth considering, even if eventually rejected.

[jimt46]

SergeLLLL. It was S&P 1000+ not 400. Now he thinks we have peaked and are headed back down. You really need to read his stuff rather than just guessing at it.

[SergLLLL]

No, I know what I am talking about, since August 2009 he has been "predicting" over and over a reversal in the market and the final target of the S&P500 is 400!

Anybody who does a YouTube search on Robert Prechter will see I am right.

[mlndstream]

I agree that he was over confident with the Aug call, and again a few months later, but since Aug the Dow gained very little, and has since corrected,shaving off a fair amount of the gains since Aug anyway,the test for me,will be to see if the markets pull out of this present downturn to make new highs,or continue down to make lower lows than in march 09 as Prechter is predicting,it's going to be an interesting learning experience,but it seems it's easier to pick market bottoms than tops

[SergLLLL]

Agree, except from August Indexes went ups a little bit more than you state. In August 2009 he said that only professionals should short the Market. In November 2009 he said short the markets. Recently he said short the market 2 to 1 bear fund.

The most disturbing fact of all is that he claims he "predicted" March 2009 lows.

All he said is cover short for now. And his news letter did not indicate by any mean a bottom.

[mlndstream]

The big problem I have with Prechters views,is that he may be underestimating the will of governments to continue staying in power,and in a true deflationary environment the tax they need to survive starts to get severely reduced as individuals income taxes fall with their incomes,or they lose their jobs entirely, or businesses start declaring tax deductions due to losses for which they want to be reimbursed etc,I think govt's will be desperate to devalue or inflate in some way or else default

[pfeiffer101]

@mlndstream - Yes. Governments have not figured out a way to tax deflation which is why they have an incentive to create inflation. If stock goes up purely b/c of inflation but it purchases the same amount of goods and services then you are still required to pay capital gains taxes! So you have a loss in real terms even though you had a gain in nominal terms. However deflation would make the pensions California workers and other government employees receive more valuable.

[herbs814]

@mlndstream

Leading indexes appear to be signaling bearish outlooks. Russell 2000 has formed a double top. Nasdaq is forming a head-and-shoulders top. Dow Transports are also showing bearish technical indicators. Major indexes show more signs of moving lower rather than higher.

[mlndstream]

I have no doubt that deflation should be what happens,but when governement's become determined to'print money'(which I agree hasn't worked so far)or they devalue the currency like they did to get out of the last Great Depression,or if they just default(due to not being able to obtain money to pay interest, or maturing treasuries at full term)causing a currency collapse due to faith in a govt to pay it's debt being what 'backs' a currency, the result becomes gold being the only money left imo

[herbs814]

@mlndstream

This is the same thing Prechter is saying. Credit deflation occurs first; leverage ratios fall, credit outstanding declines, assets are divested in favor of liquidity (sold for cash or pledged as collateral). But eventually fractional reserve systems fail. And full-reserve commodity-based money (like GoldMoney) is the only trustworthy system.

"There is no means of avoiding a final collapse of a boom brought about by credit expansion." Ludwig von Mises

[mlndstream]

So in your view, precious metal will be the place to be, but not until everyone has first dumped all their assets for the 'safety' of US dollars, only to find that is precisely when the dollar collapses, at a time when no one thinks it could? and that this time may be as late as 2014-2016 at the bottom of Robert Prechter's timing for the bottom of the Depression?. It wouldn't surprise me if this is the scenario that occurs,because even correct predictions are usually too early

[mlndstream]

Great quote from Ludwig von Mises, by the way, I've seen a few lectures by Hanns Herman Hoppe on youtube, but although he states the natural progression of the world will be towards centralization of govt into a single world govt under a single world currency, I actually believe it will occur, where he chooses to believe the world will pull back from this outcome.

[mlndstream]

I would be interested to hear your view on Pastor Lindsey Williams 'insider/elite' informant's statements about what they want to do to the world in the next few years. His DVD's deliberately have no copyright on them so they are available on youtube.The 3 DVD's are titled Tragedy,Hope and Reality if you want to search them.The basic forecast is:full scale war scripted in middle east around late 2011,oil to remain under $80/b till this time,gold/silver all that can be relied upon by then

[mlndstream]

Actually, when I heard Lindsey Williams discussing the content of his DVD's in an interview, he said oil would stay under $80 until the war(when of course world supply becomes drastically reduced) and a short while ago it briefly popped it's head about $80 but then dived back down around $70.But in the DVD's he says oil to remain between $50-$70 until the war to bleed revenue from oil producing countries and prevent US collapsing prematurely, and to force countries to spend $US reserves

[mlndstream]

Also, I remember that Robert Prechter's earlier forecast for the bottom of the Depression was 2012 give or take a year, and I believe he has shifted his projection due to how much longer the waves are taking to unfold than he would normally expect from the wave pattern, but is it impossible that the first two waves could have taken a long time,but the next 3 waves occurring much faster to finish by 2012?The Foundation for the Study of Cycles predicts gold/silver to peak 2011,dollar bottom 2012

[MarcusCMarcellus]

I'm enjoying the discussion you guys are having even if my work schedule prevents me from properly contributing - but Lindsey Williams?!?! The few times I heard that guy on Alex Jones he struck me as insane or senile or both. His whole analysis seems to be based on conversations with "elitists" on an Alaskan pipeline? Since you've actually watched his DVD's, what's his actual record?

[mlndstream]

His previous 2 predictions that I'm aware of(havn't seen his previous dvd's)was calling oil to fall from it's high of up around $140/barrel down to $50/b, which it did only months or so after he went public, he even said he was scared to go public with this forecast because he found it hard to believe himself that oil could drop that much that fast, but around the march lows it went below $50 for a while.The reason for dropping the oil price was to bankrupt a few Arabic oil states

[mlndstream]

the other prediction that Lindsey Williams mentioned didn't eventuate, he was told that McCain was their man for President, but some other Wall St elitists wanted Obama and got him and they were angry with him as he wasn't doing what they wanted him to do, so it seems just because they want something doesn't guarantee they get it when they want, but they don't give up. He was told to shut up with threats when his source found out he was going public with these 2 predictions, so he stopped

[mlndstream]

Later, he spoke to his sources but one in particular, who appreciated that he stayed quiet when he was told to, and so told him more about what was coming in the future with the freedom to go public. On Alex Jones he seemed nervous and I'm not surprised. I've watched his latest DVD's, and he is not so repetitive, there is still some repetition of course(I assume to be a habit from his sermon giving days)but he breaks into tears in the last DVD which seemed very genuine to me

[mlndstream]

I found it interesting that his main elitist source told him that previously purchased treasury debt was being paid for(maturing or just interest I'm not sure)with new purchases of treasuries, so the Fed was buying them, but that this couldn't continue(I thought it was just to keep rates down to get banks lending to the public rather than buying treasury debt for save interest so that the very low interest rates weren't so attractive to the banks?)

[mlndstream]

The reason he found himself in the board meetings with heads of big oil companies with members of the IMF etc in attendance,was because he was saving them so much money in counselling fees for the work men that they saw him as a money maker like them and gave him executive clearance etc...which is where he witnessed them first hand discussing what they will make the oil price to be in the future and why,and he said that the oil price always did what they said it would soon after they decided it

[herbs814]

@mlndstream

First of all, I don't think it was an accident that Pastor Williams used the title Tragedy and Hope. I think he makes a reference to "Tragedy and Hope" by Carroll Quigley. Quigley is understood to be an elitist insider and One World proponent.

[mlndstream]

Lindsey Williams does mention Carroll Quigley and the title of the book he wrote, he also mentions that when people asked Carroll Quigley why he thought he could get away with make the contents of the book public, he said no one will believe it anyway, just like people seem to have trouble believing Lindsey Williams, which is why I think his main elitist source came back to him with more info once he found hardly anyone was listening anyway.

[mlndstream]

My only concerns about Lindsey Williams forecasts are that his source was either pushing disinformation(which is so far all coming true,apart from oil poking its head above $80 briefly), or that the elitists don't succeed in fully carrying out their plans for some reason and change their strategy or timeline without informing Lindsey Williams, or perhaps even not informing his source of the changes etc...but I'm quite satisfied that Lindsey Williams intent is to be 100% honest

[herbs814]

@mlndstream

People don't believe the truth when they hear it. It's a tragedy as old as life itself. Eve did not believe she should not eat the fruit of the tree. Noah preached for years while he built the arc, but only his family would enter. Cassandra prophesied the fall of Troy, but not even her parents (the king and queen) would listen.

Prepare yourself and protect your family. Let people know what you know and what preparations you would make. The rest is their responsibility.

[mlndstream]

I heard the term 'Cassandra' used recently, and had no idea what it meant, now I do, thanks. I've seen the movie Troy a few times, and they certainly didn't script Cassandra in anywhere, I had never heard of her, Helen got plenty of lines though, the trouble maker who triggered it all

[herbs814]

@mlndstream

While the trend toward increasing centralization and one world government makes intuitive sense (Jefferson said it was the natural course for liberty to yield and government to gain power), Prechter's Socionomics Institute has an analysis that seccession movements may increase in number, power, or intensity in waves of pessimism. When pessimism increases and economies falter, will people trust markets and reject government?... or reject markets and trust government?

[mlndstream]

I'm pretty sure they will reject markets and trust governments,I have a normal fairly low paying but secure full time job,and almost everyone I know has no clue about whats happening in the world at all and have no interest in knowing, they expect govt to solve all their problems and they just do and believe what govt tells them to.The truth sets people free, but when people prefer to believe lies and indulge in escapism instead,then it's time to learn the hard way as history repeats itself

[herbs814]

@mlndstream

"precious metal will be the place to be, but not until everyone has first dumped all their assets for the safety of US dollars"

Dollars will rise in value due to the legal necessity of repaying debts with the legal tender in which they were denominated. There are massive debts outstanding and more liabilities promised but not funded (pensions, medicare, etc.). Legally, they must be paid in USD. As the schedule of payment accelerates, the value of the legal tender may as well......

[herbs814]

... 3 ways for govt (largest debtor) to pay debts: tax, borrow, print. Borrowing + printing just delay the deflating of the government bubble -- settlement of outstanding debt obligations payable in USD. Govt must eventually cut spending and welfare transfers or raise revenues (taxes, etc).

If govt pays less to the private sector, private savings would be more valuable. If higher taxation drains private savings, the remaining USD in private hands would be more valuable for being more scarce.

[mlndstream]

Antal E.Fekete(Professor of Monetary and Banking at Sanfrancisco school of Economics)seems to think the only way the worlds monetary problems are going to be fixed is by either revaluing gold upwards to satisfy all debts,or a complete debt jubilee where all debt is canceled which would also include bank deposits(fiat currency is debt?so I assume it becomes worthless too?)since the banks would owe this to the depositors,and in this instance the goods that people owed money on would become theirs

[mlndstream]

The problem I have with the idea of dollars becoming so valuable due to scarcity, is because I don't get how a govt will be able to pay it's maturing treasury debt (which was incurred during a time when dollars were plentiful) when they become so scarce, they would have to default. If US treaury debt is so many trillions, and that has to be paid back during a time when govt tax revenue has slowed to a trickle due to businesses closing and massive unemployment, where do they get the money from?

[mlndstream]

Almost all the money the govt would be taking in(which will be massively less than now) would be going towards servicing treasury debt, and if there's that much taxation, how could they afford any services at all?they are bound to default, and if they do then faith is lost in the govt to maintain its debt obligations which back the currency, so surely it would collapse/hyperinflate like every other currency does when the govt defaults on it's debts?

[mlndstream]

surely they would need to at least 'devalue' the currency like they did to get out of the last great depression when they devalued it by 25% by printing more paper currency than they had gold to back it? I've heard Marc Faber say that when 50% of govt taxes are going to pay govt debt then historically they go to war to fund it, perhaps this is another option, I guess there will be plenty of unemployed people around to be enlisted so govts can pay their debts via the blood of their citizens?

[mlndstream]

"As historical research conducted by University of Maryland economist Carmen Reinhart and Harvard University economist Kenneth Rogoff shows, financial crises are usually followed by government-debt crises.

[mlndstream]

This starts as private debt is shifted onto the balance sheet of the government, through bailouts and purchases of toxic debt. The government-debt problem is then made worse as the economic downturn leads to an increase in expenditures in the form of unemployment benefits and stimulus spending, coupled with a decrease in tax revenues." just an interesting quote I read recently if it helps put all the pieces together

[herbs814]

gold goes up when the economy expands and falls when the economy contracts.

[mlndstream]

Unless perhaps gold was purchased in a'risk'currency like the Australian dollar.Gold hit a high in AUD around February 09 when markets bottomed and the USD was so strong relative to the AUD,it seems that the AUD weakens more during risk aversion than gold.Besides,on the balance of the worst case scenario outcomes,currencies can become virtually worthless, while gold at least holds it's purchasing power. In fact gold fell a much smaller percentage than every other non-cash asset in USD terms?