Forget What We Said About Inflation, Say Big Investors -- It's DEFLATION You Should Be Worried About
Over the past six months, the smart money has gone from trying to cash in on the coming hyper-inflation the US will suffer as the Fed desperately tries to re-inflate the economy and destroys the dollar in the process...to reversing course and trying to cash in on a coming deflation.
For example, here's PIMCO guru Bill Gross in the Wall Street Journal:
"Deflation isn't just a topic of intellectual curiosity, it's happening," says Mr. Gross, who runs the $239 billion mutual fund Pimco Total Return Fund, citing an annualized 0.1% decline over the past two years in the U.S. consumer-price index. "It's an uncertain world that's tipping toward deflation."
This article shows sophisticated investors with no experience with deflation and who worried about inflation their entire lives are having trouble wrapping their minds around the notion that prices can also enter a downward as well as an upward spiral. Federal Reserve policymakers have also been grappling with the depressing prospect of deflation. Their challenge is like that of pilot trying to precisely determine how much throttle to give a plane on the verge of stalling -- which is where the economy is now. Too little and the aircraft stalls and begins falling to the ground. Too much throttle and the engine races out of control, overheating the economy and setting the stage for another crash.