At this point in time, a MUCH greater threat with incredible repercussions is deflation. If you follow global finance and economics you will see that it started with japan, Europe is there, and with falling oil and commodity prices, its coming to our shores quick.
Thanks 2Birds1Stone. The falling oil price is crushing the Canadian oil sands business which is not profitable at these oil prices. That oil sands business was a large economic driver for all of Canada's small economy over the last few years. The fallout is already beginning to spread to Alberta house prices:
http://globalnews.ca/news/1757580/oils-collapse-sends-shiver-across-albertas-real-estate-market/
"Sales are down 7.5 per cent versus a year ago, while new listings have gushed 42 per cent higher – a sign homeowners are racing to sell before market conditions deteriorate."
Would you care to speculate as to what would be the silver lining that could sway the deflationary cloud?
This is a tough one to swallow for many, now bear in mind that global monetary policy is trying their hardest to inject money into the system and create artificial inflation. That is a bandaid to the whole cause and not a permanent fix. This is a post I am quoting from another message board I am on. Greg Davis is a VERY smart poster who does a pretty good job of explaining things as they are today. Take it with a grain of salt but understand this is something that will not simply just "go away".
?Silver prices will fall next year to mid single digits as a result of powerful overwhelming global forces.
Global deflationary depression is unavoidable and has been, and will continue to occur. Despite trillions of dollars of global monetary stimulus we have seen falling commodities prices for more than a year now and they are going to continue to fall to unexpected levels as deflationary expectations become mentally entrenched in consumers creating a deflationary spiral where everyone waits to buy in the future as things will be cheaper then.
Fossil fuel deflation is the most recent and prominent example of even the most powerful and wealthy global cartel’s inability to stem deflation. Nothing can stop it. Why? There are several reasons: Un-repayable debt, global economic contraction, and wage pressures.
Because the planet has aggregate debt (personal, business, and governmental) exceeding $230 Trillion and only has Official GDP of approximately $73 Trillion. (Real GDP is closer to $58 Trillion when the gimmicks are removed.) For example, Italy (8th largest economy in the world) just decided to include estimates for illegal drug sales and prostitution in their GDP as they experience their 14th consecutive quarter of GDP contraction.
The bottom line is the debt can never be repaid and will be repudiated. At the personal and business levels that looks like bankruptcy where debt is discharged and at the sovereign level that looks like “restructuring”, where bondholders are offered pennies on the dollar like the Greeks just did.
When debt is repudiated, money supply contracts usually by 10 times the amount repudiated. When money supply contracts, prices fall. It’s just that simple.
Global economic cycles will run their course and have been “postponed” by incessant monetary manipulation, which will make the snapback commensurately faster and deeper as it does occur. Aging populations, reduced family formations, declining birthrates, "one child Policies", technological innovations including robotics all contribute to the declining employment in the world and its associated economic activity. Central Bank money creation will not stop deflation either as Japan has proven. Under Abe, Japan's monetary base doubled in the last year and still they fight deflation. Monetary velocity has slowed dramatically as aging populations spend less, more than offsetting the increase in monetary supply.
Global population is now 7.3 Billion and half of all those people live on less than $2.50 per day. 80% of all humans live on less than $10 per day. The US makes up less than 5% of the world’s population and we live in a massive wage bubble blown out of all semblance of proportion or relativity by unions and government mandate financed with massive un-repayable debt. When interest rates see free markets again they will snap higher and the US will not be able to pay its interest and will not have new debt available to it any more and will have to compete in global labor markets forcing wages to drop dramatically furthering deflation.
Precious metals markets and all commodities are signaling deflation now. Mid year I see silver approaching $11 as that is its variable cost of production and mid single digits by year end unless a Black Swan event drives the “Safe Haven” trade.