Deflation - a Looming Disaster *AUDIO*

Warren Pollock details the deflationary forces, and I think he is right on, with what is happening during this phase of contracting credit and higher dollar. In this environment, commodities experience an expected vicious correction. Where our opinion is slightly different though, is the end game which could start once this phase is over. While the government might not be fast enough to counter-act the current tightening of credit, that does not mean they won't ultimately succeed. After all, the more serious the economic problems, the more aggressive the expected Fed/government response. And the situation has not seemed to be that critical lately, so why respond. In Warren's outlook of deflation, real estate and the stock market would be total casualties, and this is clearly possible. But at the same time, this then does justify a new wave of monetary stimulus.