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Today, the entire global economy is deflating. Commodity prices are falling because industrial demand is collapsing worldwide. Once economic deflation is underway, debt snowballs.
The Federal Reserve will turn the money spigots wide open to mitigate the paralyzing effects of deflation on the U.S. consumption-economy. For now, the dollar is strong because the yen and the Euro are weakening FASTER; but the true value of the dollar is declining.
There are striking parallels between the U.S. economy (since 2008) and the economy of the German Weimar Republic in the 1920s. When recession hit the German economy, the central bank printed massive amounts of currency to stimulate business activity and pay debt. The cost of living was rising, the middle class was getting poorer, and debt was growing.
Although core fundamentals in the economy were deteriorating, industrial magnates benefited from money printing. Easy credit enabled big business leaders to wipe out their debts with cheap money. They bought companies, expanded plants, and speculated in foreign exchange with borrowed money. Germany’s booming stock market was the envy of Europe. All of a sudden, market psychology changed………