Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
How Sony Is Fueling the Computer Vision Boom - 3rd Aug 20
Computer Gaming System Rig Top Tips For 6 Years Future Proofing Build Spec - 3rd Aug 20
Cornwwall Bude Caravan Park Holidays 2020 - Look Inside Holiday Resort Caravan - 3rd Aug 20
UK Caravan Park Holidays 2020 Review - Hoseasons Cayton Bay North East England - 3rd Aug 20
Best Travel Bags for 2020 Summer Holidays , Back Sling packs, water proof, money belt and tactical - 3rd Aug 20
Precious Metals Warn Of Increased Volatility Ahead - 2nd Aug 20
The Key USDX Sign for Gold and Silver - 2nd Aug 20
Corona Crisis Will Have Lasting Impact on Gold Market - 2nd Aug 20
Gold & Silver: Two Pictures - 1st Aug 20
The Bullish Case for Stocks Isn't Over Yet - 1st Aug 20
Is Gold Price Action Warning Of Imminent Monetary Collapse - Part 2? - 1st Aug 20
Will America Accept the World's Worst Pandemic Response Government - 1st Aug 20
Stock Market Technical Patterns, Future Expectations and More – Part II - 1st Aug 20
Trump White House Accelerating Toward a US Dollar Crisis - 31st Jul 20
Why US Commercial Real Estate is Set to Get Slammed - 31st Jul 20
Gold Price Blows Through Upside Resistance - The Chase Is On - 31st Jul 20
Is Crude Oil Price Setting Up for a Waterfall Decline? - 31st Jul 20
Stock Market Technical Patterns, Future Expectations and More - 30th Jul 20
Why Big Money Is Already Pouring Into Edge Computing Tech Stocks - 30th Jul 20
Economic and Geopolitical Worries Fuel Gold’s Rally - 30th Jul 20
How to Finance an Investment Property - 30th Jul 20
I Hate Banks - Including Goldman Sachs - 29th Jul 20
NASDAQ Stock Market Double Top & Price Channels Suggest Pending Price Correction - 29th Jul 20
Silver Price Surge Leaves Naysayers in the Dust - 29th Jul 20
UK Supermarket Covid-19 Shop - Few Masks, Lack of Social Distancing (Tesco) - 29th Jul 20
Budgie Clipped Wings, How Long Before it Can Fly Again? - 29th Jul 20
How To Take Advantage Of Tesla's 400% Stock Surge - 29th Jul 20
Gold Makes Record High and Targets $6,000 in New Bull Cycle - 28th Jul 20
Gold Strong Signal For A Secular Bull Market - 28th Jul 20
Anatomy of a Gold and Silver Precious Metals Bull Market - 28th Jul 20
Shopify Is Seizing an $80 Billion Pot of Gold - 28th Jul 20
Stock Market Minor Correction Underway - 28th Jul 20
Why College Is Never Coming Back - 27th Jul 20
Stocks Disconnect from Economy, Gold Responds - 27th Jul 20
Silver Begins Big Upside Rally Attempt - 27th Jul 20
The Gold and Silver Markets Have Changed… What About You? - 27th Jul 20
Google, Apple And Amazon Are Leading A $30 Trillion Assault On Wall Street - 27th Jul 20
This Stock Market Indicator Reaches "Lowest Level in Nearly 20 Years" - 26th Jul 20
New Wave of Economic Stimulus Lifts Gold Price - 26th Jul 20
Stock Market Slow Grind Higher Above the Early June Stock Highs - 26th Jul 20
How High Will Silver Go? - 25th Jul 20
If You Own Gold, Look Out Below - 25th Jul 20
Crude Oil and Energy Sets Up Near Major Resistance – Breakdown Pending - 25th Jul 20
FREE Access to Premium Market Forecasts by Elliott Wave International - 25th Jul 20
The Promise of Silver as August Approaches: Accumulation and Conversation - 25th Jul 20
The Silver Bull Gateway is at Hand - 24th Jul 20
The Prospects of S&P 500 Above the Early June Highs - 24th Jul 20
How Silver Could Surpass Its All-Time High - 24th Jul 20
China Recovered in Q2. Will the Red Dragon Sink Gold? - 23rd Jul 20
UK Covid19 MOT 6 Month Extensions Still Working Late July 2020? - 23rd Jul 20
How Did the Takeaway Apps Stocks Perform During the Lockdown? - 23rd Jul 20
US Stock Market Stalls Near A Double Peak - 23rd Jul 20
Parking at Lands End Car Park Cornwall - UK Holidays 2020 - 23rd Jul 20
Translating the Gold Index Signal into Gold Target - 23rd Jul 20
Weakness in commodity prices suggests a slowing economy - 23rd Jul 20
This Stock Market Stinks - But Not Why You May Think - 22nd Jul 20
Protracted G7 Economic Contraction – or Multiyear Global Depression - 22nd Jul 20
Gold and Oil: Be Aware of the "Spike" - 22nd Jul 20
US Online Casino Demographics: Who Plays Online For Money? - 22nd Jul 20
Machine Intelligence Quantum AI Stocks Mega-Trend Forecast 2020 to 2035! - 21st Jul 20
How to benefit from the big US Infrastructure push - 21st Jul 20
Gold and gold mining stocks are entering a strong seasonal phase - 21st Jul 20
Silver Eyes Key Breakout Levels as Inflation Heats Up - 21st Jul 20
Gold During Coronavirus Recession and Beyond - 21st Jul 20
US Election 2020: ‘A Major Bear Market of Political Decency’ - 21st Jul 20
Summertime Sizzle for Gold and Silver - 21st Jul 20
Overclockers UK Custom Built PC Review - Delivery and Unboxing (3) - 21st Jul 20
Will Coronavirus Vaccines Become a Bridge to Nowhere? - 20th Jul 20
Stock Market Time for Caution?  - 20th Jul 20
ClickTrades Review - The Importance of Dynamic Analysis and Educational Tools in Online Trading - 20th Jul 20
US Housing Market Collapse Second Phase Pending - 20th Jul 20
Capitalising on the AI Mega-trend - 20th Jul 20
Getting Started with Machine Learning - 20th Jul 20
Why Moores Law is NOT Dead! - 20th Jul 20
Help the Economy by Going Outside - 19th Jul 20
Stock Market Fantasy Finance: Follow the Money - 19th Jul 20
Did the Stock Market Bubble Just Pop? - 19th Jul 20
Quick Souring of the S&P 500 Stock Market Mood - 19th Jul 20
The Six-Year Jobs Recession - 19th Jul 20
Silver Demand Exploding! - 18th Jul 20
Tesco Scraps Covid Safe One Way Arrow Supermarket Shopping System - 18th Jul 20
The Rise of Online Pawnbroking - 17th Jul 20
Gold Rallies Together With U.S. Covid-19 Cases - 17th Jul 20
Gold & Silver Measured Moves - 17th Jul 20
The Bizarre Mathematics Of How Negative Interest Rates Create Stratospheric Profits - 17th Jul 20
From a Stocks Bull Market Far, Far Away, Virus Doomsday Scenerio! - 16th Jul 20
Fiscal Cliffs and the Self-destructing Treasury - 16th Jul 20
Dow Stock Market Crash Watch - Update - 16th Jul 20
Gold & Silver Gaining on US Dollar Weakness - 16th Jul 20
How to Find the Best Stocks to Invest In - 16th Jul 20
Overclockers UK Custom Build PC Review - 2. System Build Changes Communications - 16th Jul 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Deflation Continues, Will the United States Become Another Japan?

Economics / Deflation Apr 22, 2009 - 06:54 AM GMT

By: Money_and_Markets


Best Financial Markets Analysis ArticleNilus Mattive writes: Clearly, deflation remains the biggest near-term threat to the U.S. economy.At the consumer level, prices pulled back 0.1 percent during the month of March. That was mainly driven by declining energy prices, and in spite of the biggest jump in tobacco prices in at least 10 years. (The government initiated a large tax hike on smokes during April.)

For the 12-month period ending in March, prices for consumer goods dropped 0.4 percent. That’s the first 12-month bout of deflation in 44 years!

And the March data on producer prices showed a 1.2 percent drop, too.

These are shocking reminders that despite the government’s best efforts, and despite the stock market’s substantial rally, the U.S. is still struggling with a rather dangerous deflationary trend.

And perhaps that’s why …

Many Continue Asking: Will We “Become Like Japan?”

During a recent interview, that question came up yet again.

The fear is that people become so shell-shocked that our country will suffer a protracted bout of deflation and a stuck-in-the-mud economy.

To be sure, there are parallels between our current situation and what happened in Japan back in the 1990s.

We’ve had a real estate bust. Interest rates are practically at zero. Stocks have cratered. The list of similarities goes on and on!

Yet I do not see the same end result here in the United States.

We are far bigger, and more diversified. Plus, I still feel very strong pockets of unbridled optimism in this country.

Even now, there are plenty of people finding novel new ways to get rich!

For example, a few months ago I read a story about a guy in Las Vegas who started a business that profits from the foreclosure crisis.

No, he doesn’t buy distressed property. He goes around spray-painting lawns green!

Sounds crazy, right? Well, banks and other real estate sellers are using this guy’s service as a cheap way to make their listings look more presentable to prospective buyers. And he’s making a whole lot of green in the process.

Making money by spray-painting foreclosed homes' lawns? Now that's American ingenuity!
Making money by spray-painting foreclosed homes’ lawns? Now that’s American ingenuity!

I couldn’t think of a better symbol of our country’s resiliency and resourcefulness!

I suppose I’m in the minority, but I continue to believe that our nation is still made up of creative, entrepreneurial people who are going to continue innovating, borrowing, and plugging along!

The United States remains the economic engine of the world. No country is better at dreaming, designing, and implementing. I am reminded of that every time I see a product package that says “Designed in the U.S.; Manufactured in China.”

What About Consumers? Haven’t They Been Scared Away from Spending?

To some degree, yes.

The March retail sales numbers showed a decline of 1.1 percent. And even if you exclude auto sales, results were still off by 0.9 percent. But even now I also see plenty of people still out spending.

For example, I took my family down to the beach this past weekend and I couldn’t get over how many people were swarming the shops and restaurants.

And when I looked at seasonal rental sheets, the vast majority of units were rented straight through the season!

I do think the idea of more modest spending — and more vigorous saving — is being revisited in this country. That’s a good thing.

At the same time, I do not see a complete cultural shift taking place. And since deflationary spirals are largely driven by psychology, I don’t see one taking place here.

Of course, I recognize that there’s another implied question when someone asks me about a Japan-style situation …

Will We See a “Lost Decade” in Stocks As the Economy Muddles Along?

My answer: We’ve already seen one!

Even now, after a very nice rally, U.S. stocks remain roughly in the same spot they were about 12 years ago!

Twelve years later, the S&P 500 is right back where it started ...

Could we possibly see another 10 years of flat prices? Yes, but I consider it highly unlikely. And since most of my favorite investments are dividend stocks, I don’t lose a lot of sleep over that possibility, either.

Remember, when you own steady dividend payers, you are earning solid returns no matter what the share prices do.

Moreover, if you’re reinvesting your dividends, you are continually buying more shares throughout the flat periods and setting yourself up for very sizeable gains when the uptrend resumes.

Lastly, even during substantial periods of deflation, many of my favorite dividend payers would have substantial pricing power because the goods and services they provide are necessities, not luxuries.

Case in point: Medical care costs rose yet again during the month of March, bucking the overall trend. And while food prices dipped 0.1 percent, they were UP 4.3 percent during the rolling 12-month period.

If that doesn’t support the idea of holding solid dividend-paying consumer staples and healthcare companies during this downturn — even if deflation gets worse — I don’t know what does.

Best wishes,


P.S. And yes, I still remain concerned that the Fed will have a difficult time applying the brakes when inflation does begin kicking in. So I continue to suggest at least a small allocation to inflation-protected securities such as TIPS or I-Bonds, too.

This investment news is brought to you by Money and Markets . Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit .

Money and Markets Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules