Sunday, September 2, 2012

Are We Entering a Deflationary Era? These Charts Say "Yes"


Are we entering an era in which prices stagnate and the purchasing power of the U.S. dollar rises? Our Chartist Friend from Pittsburgh has kindly provided two charts which suggest we have entered such a deflationary period.

Long-time readers know I have presented technical evidence for over a year that the U.S. dollar appears to be in along-term uptrend, at least relative to other currencies. These charts suggest the uptrend is not just nominal but in purchasing power.


Here is Chartist Friend's commentary on the charts:After the bombshell disclosure by JPM there is no doubt in my mind that the financial system is in the process of relentlessly deflating. If they by themselves have the tens of trillions of derivative bets that they are alleged to have, then God help us if that bank blows up.As I have pointed out previously, they topped the DJIA on an occult date (May Day) at an occult number (13,330.30) so I also have no doubt that the coming deflation is as much a part of the plan as the reflation off the SPX 666 bottom was.
The CPI purchasing power of the consumer dollar chart is simply an inverse CPI chart, though FRED presents them separately to make sure we are aware that the value of the dollar has been destroyed since the Fed took control of the currency. Since they each have their own chart it's best to view them together. In this way it becomes crystal clear that a rising dollar and deflation go hand in hand, and also that we are entering uncharted economic territory.Thank you, Chartist Friend, for the eye-opening charts and commentary.

*Post courtesy of Charles Hugh Smith at Of Two Minds.

 

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