The Great Deflationary Collapse Continues …

Posted by Larry Edelson - Commodities, Stocks, Technical Analysis

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Screen Shot 2015-12-16 at 5.18.25 AMEverything I have been warning you about is unfolding, right on cue.

I’m talking about DEFLATION — the D-word no one wanted to hear more than four years ago when I first forecast it. 

The D-word that had all the hyperinflationists up in arms. The D-word that even had some of my colleagues and subscribers wondering if I had lost my mind. 

After all, I too once thought that the Fed’s money printing would stir up inflation. 

But when gold peaked at $1,925 an ounce in September 2011 right after Ben Bernanke announced the most aggressive Fed printing ever, I knew something was afoot. 

Gold should have responded positively, but it didn’t. Instead, it started to crash. A crash that continues to this day.

Fortunately, I was alert and savvy enough to recognize it and start warning you early on that inflation would not be a problem. That instead, deflation would become the threat. 

I knew way back in September 2011 it was coming. But I wasn’t quite sure why deflation would gain the upper hand. After all, we’ve been taught that when the central bank prints money, it’s inflationary, period. 

But leave it to gold to signal the most important monetary changes in history, something it has always signaled through its actions. Back in September 2011, when gold failed to respond positively to more money printing, I listened to what gold was saying, I adjusted, reexamined all my models, reviewed the history and mechanics of the current monetary system …

And I took a much closer look at what was happening to global debt and in particular, the train wreck that was unfolding in Europe.

I quickly realized that …

One, there’s simply way too much debt in the world. At more than $200 trillion of official total global debts — there is simply no way printing money could offset the deleveraging process that must occur.

Simply put, $3 trillion of Fed money printing, combined with another $2.4 trillion from other central banks over the past several years — a total of $5.4 trillion of printed money — is merely like throwing a coin in the middle of a lake and expecting a tsunami of inflation. It’s not going to happen.

Combined, all the central banks of the world would have to print far more than $200 trillion for hyperinflation to ever strike.

To make matters worse, the deleveraging that started with the real estate crisis of 2008-09 has barely gotten started.

Quite the contrary, the total global debt burden has gotten worse, much worse. Since 2007, government debt has grown a whopping $25 trillion, more than $3 trillion per year. 

Total global debt has mushroomed $57 trillion since 2007, more than $7 trillion per year. 

Combined with austerity programs rammed down people’s throats in places such as Europe and Japan, total global debt to GDP has increased an amazing 17 percentage points since 2007. 

Some of the most indebted countries are absolute basket cases: Japan, debt to GDP: 517%. Spain, 401%. Germany, 258%. And the U.S., with official debt to GDP at a whopping 269%. 

I say “official” because all the figures above are gathered from reliable statistical sources and do NOT include the effect of securitization, leverage upon leverage, and shadow banking, which exists even in the U.S.

Add in a rough but conservative estimate of another $200 trillion in unofficial debt, and you have a global economy getting crushed by over $400 trillion of debt, something that can never turn out to be anything but deflationary!

Two, I also realized, way back in 2011, that the U.S. wasn’t the problem, as indebted as it was, and still is. Nor would it be China, who even today is wrongly cited as the biggest threat to the global economy.

I said way back then, and I warned you repeatedly, that the biggest threat to the global economy, and the biggest trigger to set off a deflationary spiral was none other than Europe. 

I was right. Europe was, is and will be the biggest threat to global growth and the biggest force behind deflation.

Screen Shot 2015-12-16 at 5.17.37 AMWhy? I could write a novel about the problems in Europe. Suffice it to say that …

Europe’s problems began way back in 1998 with a half-brained attempt to create a United States of Europe with a single currency …

A currency that did not have the proper banking or reserve infrastructure in place to work.

A currency that forced 19 different countries and 24 different official languages into one label … 

And a currency that made it way too easy for weaker economies to join the Union, borrow loads of money at low rates, setting the stage for the collapses you are seeing now in countries such as Greece, Spain, Portugal, Italy, and soon, even France. 

The single currency experiment in Europe is the most ill-conceived economic/social experiment of all time. I said it in 1998, and my words have come true. Europe is crashing and burning.

The attempted manipulation of the monetary systems there, of the cultures, of the different peoples and their traditions, their individual sovereignty and more …

Has caused most of the problems you are seeing today, most of the deflation. And it has also set the stage for civil wars and even the potential for international war as entire societies and cultures break apart as Germany and Brussels continue to insist on austerity and holding the Union together. 

Mark my words: By 2020, the year my war cycles peak, a short five years from now, you will see Europe torn apart at the seams, the euro fail as a currency, wars break out between member countries, and even secession movements succeed within countries.

So what do you do with your investments right now, with oil and gas collapsing, precious metals still looking weak, most commodity prices falling, and the stock market still teetering?

You keep your money safe, and in the right investments, just like the members to my Real Wealth Report are doing, where I have helped them achieve a 16.9% return, year-to-date, beating out almost every hedge fund out there, almost every mutual fund and more. 

Stay safe, and stay tuned …

Best wishes,




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Larry Edelson, one of the world’s foremost experts on gold and precious metals, is the editor of Real Wealth Report and Supercycle Trader.

Larry has called the ups and downs in the gold market time and again. As a result, he is often called upon by the media for his investing views. Larry has been featured on Bloomberg, Reuters and CNBC as well as The New York Times and New York Sun.

The investment strategy and opinions expressed in this article are those of the author and do not necessarily reflect those of any other editor at Weiss Research or the company as a whole.