Inflation Deflation Switch Turns Entire Investment World Upside Down for 2009

[Danascot]

I'm not sure I agree with everything it says but this article makes a number of points worth thinking about:

- Deflation is taking a firm hold on the US Economy and will last for some time.
- Deflation causes the value of most assets to decline, and the value of the dollar to increase.
- The size of the current and planned federal stimulus packages is barely significant when compared to the magnitude of the problem.
- We're currently experiencing destruction of wealth and liquidation of debt: debt collapse.

"The key is the debt liquidation. That's the main engine behind the deflation and a major element in vicious cycles that are just beginning to gain momentum. Consider the housing market, for example. The more debts are liquidated, the more prices fall … and the more prices fall, the more people abandon their homes and mortgages, leading to more debt liquidation."

- It may take years to flush out bad debt.
- While battered, the US dollar, will remain the favored global currency, and demand for it will remain strong.
- Sell whatever you can to raise cash.
- There will be opportunities in investments that increase when the dollar strengthens.

http://www.marketoracle.co.uk/Article7939.html