You may have already heard and read several of Robert Prechter's recent media interviews -- but this one really goes in-depth.
On June 19, Prechter spent an hour answering questions from Jim Puplava of Financial Sense Newshour. Here's a quick excerpt. The full 20-page transcript of the interview is available now, free, to all Club EWI members. (Look below the excerpt for details on free instant access.)
Jim Puplava: [Since March 2009], we've seen private sector credit contract while at the same time government credit expanded, which offset private sector contraction. But overall, credit has grown within the U.S. economy. In your opinion, can government, fiscal and monetary policies combined offset your deflationary scenario?
Robert Prechter: First of all, I don't think credit has increased in the economy. M3 has got a negative rate of change right now. That means lending is really drying up. The Fed has monetized about 1.4 trillion dollars worth of IOUs. I think that, behind the scenes, about that amount of IOUs is slowly disappearing and losing value. Certainly mortgages are losing value even though they're still marked at the original value. I think true values are falling substantially.
Let's look at a couple of other indicators; and remember, these readings are despite the fact that we have been in a reflationary environment for the past 13-14 months: We've had the dollar rally against other currencies. None of the inflationists predicted that one. We've had a very weak recovery in the CRB commodity index. The high was 474 in 2008, it fell down to 200 in early 2009, and it's sitting in the mid-200s right now. It's still down 50 percent from two years ago, and that's despite massive bailout schemes by the federal government and massive monetization by the Fed.
If the inflationists’ arguments were correct, we should be in a hyperinflationary mode right now, with commodities flying, stocks flying and the money supply zooming. And none of that is going on. When you look at the rates of change in the Producer Price Index and Consumer Price Index of the last couple of years, they've been basically at zero. They went negative and now they're positive, but they're basically oscillating around zero. That's not runaway inflation.
And even though gold just made another new high, it's by a very small amount for the past six months. Meanwhile the XAU index of gold stocks has made several lower peaks since 2008. It hasn't even taken out the 2008 high. Neither has platinum, and neither has silver. In an inflationary environment -- certainly in a hyperinflation or runaway inflation -- you get a monolithic move in everything. You're not getting that here; it's a very fractured situation.
JP: Today almost 43 cents out of every dollar the U.S. government spends is being financed with debt. In your opinion, how long can this continue before the U.S. reaches a debt limit very much in the same way that Greece has almost hit a brick wall?
RP: I'll tell you, it'll be longer than I think...
Read the rest of Prechter's interview with Jim Puplava online now, free! All you need is to create a free Club EWI profile. Here's what else you'll learn:
- Can the U.S. government devalue the U.S. dollar?
- Can the Federal Reserve continue monetizing debt?
- How difficult will making money in stocks be in the years ahead?
- MUCH more!
Keep reading this free report now -- all you need to do is create a free Club EWI profile.