Deflation strikes hard! What to do …

by Martin D. Weiss, Ph.D. 12-15-08
Martin D. Weiss, Ph. D.

The deflation we’ve been warning you about is here, and it’s striking hard.

Last week, the Fed released a report that sent chills down the spine of economists all over the world, revealing a sweeping destruction of wealth in America.

Just in the third quarter alone, U.S. households lost $647 billion in real estate; $922 billion in stocks; $523 billion in mutual funds; $653 billion in life insurance and pension fund reserves; plus $128 billion in private business interests.

Total destruction of household wealth in the third quarter: $2.8 trillion, the worst in recorded history. That’s four times more than the government’s entire $700 billion bailout package (TARP).

Total destruction of household wealth in the last year: $7.2 trillion or over TEN times more than the $700 billion TARP package.

Meanwhile, the Treasury reports that only $330 billion of the TARP funds have been committed so far. Worse, most of the funds that have reached the banks are sitting idle in their coffers. If as much as $30 billion has trickled down to households, I’d consider it a minor miracle.

See the contrast? The destruction of wealth is large and swift; the government rescues, relatively small and slow.

Yes, the White House may decide to shift some of the TARP money to cover General Motors and Chrysler’s cash needs for the next few weeks; they don’t want the auto giants going down on their watch.

But even if they can somehow save GM and Chrysler for now, they cannot save the countless smaller and medium-sized companies that are going bankrupt. They cannot save the thousands of municipalities and states that are running out of money. They certainly cannot make whole the millions of households that have gotten smacked with the $7.2 trillion in losses.

More evidence of deflation:

1. U.S. consumer prices falling at an annual rate of 12%!

2. U.S. producer prices falling at an annual rate of 26.4%!

3. Commodity prices slammed by as much as 70% from their peak!

My friend, these are not numbers that denote less inflation. They are hard evidence of deflation!
Internal Sponsorship

U.S. Automakers Doomed

No Matter WHAT Washington Does!

With GM and Chrysler less than 19 days away from bankruptcy, and with the U.S. Senate rejecting automakers’ pleas for an emergency bailout, Treasury Secretary Paulson has just pledged he will not let them fail.

Here’s why no amount of money Paulson or anyone else throws at Detroit can save GM or Chrysler now … Why massive deflationary forces are aligned to crush the U.S. economy and stock market next year … and why we are holding a …

DEFLATION SURVIVAL BRIEFING NEXT WEDNESDAY!

Click here for more information …

Your Next Steps

The critical question of our time: Will this deflation be less severe, equally severe or more severe than the 1929-1932 deflation?

If I were you, and you’ve got your portfolio or your 401k in stocks or stock mutual funds, I wouldn’t stick around for the answer.

Yet that’s what most Wall Street experts are telling you to do. Two full years after the first obvious signs of a housing industry collapse, most people who give advice about investing are still in denial.

Wall Street cheerleaders refuse to admit that an obviously massive deflation can lead to an equally massive collapse in the nation’s economy.

They’ve repeatedly sworn on a stack of Bibles that the deflation in housing would “soon end,â€