DEFLATION: Not Seen Since the Great Depression – Is it Coming?

 Deflation is looked at by economists in different ways.  The most appropriate definition for deflation is ‘a contraction in the supply of money and credit’.  It is not falling prices, although falling prices are a consequence of deflation.

 Most of the arguments for inflation are based on the US Federal Reserve and other major world Central Banks continuing to inject monies into world economies through quantitative easing programs.  So far the amount Central Banks have injected into the economy is unprecedented.

The size of these balance sheets (currently more than $15 trillion) relative to the capitalization of the world’s stock markets (presently more than $48 trillion) is shown in the chart below.  A normalized level for Central Bank balance sheets relative to world market capitalization is around 10%.  It is now above 30%. A 200% increase from normal times.  This is unprecedented in the history of Central Banks......... Financial Advisor