Is the Global Economy Entering a Period of Deflation?

Does debt work? This question already appears to have found an answer, and the coming years could reinforce the notion that the massive amounts of debt accumulated around the world are due at some point, and a price will have to be paid.

That day could be closer than many realize…

Take a look at how equity markets began 2016. The Dow Jones saw its worst start on record, the S&P 500 tumbled, and crude oil prices continued their slide to trade below $30 per barrel.

A glimpse of things to come? We think so…

Will it happen overnight? Probably not. In fact, equities have recovered from the selling onslaught seen at the beginning of the year and crude oil has stabilized – for now.

The U.S. and other nations of the world have fueled growth in a sea of debt, and this is not anything new.

In fact, some estimates put debt growth at twice that of GDP growth over nearly half a century.

What happens when debt and expenses rise at twice the rate of income? That’s right…A big, fat bust.

What we may very well see in the coming years is an end to the credit expansion that has driven growth for a long time. As this credit bubble bursts, well, let’s just say “look out.”

You’ve already seen signs of this debacle coming. Lower crude oil prices, sagging copper prices, struggling emerging markets…

Negative interest rates…The ECB and Japan are now both charging banks to hold their money in efforts to boost lending and economic activity.

Are such measures working? We highly doubt it. In fact, Japan has been fighting deflation for almost two decades and has yet to find its way out of the quicksand.

The ECB could potentially find itself in a similar situation.

And what about China?

The world’s second-largest economy has certainly had its share of negative publicity in recent months. Chinese equities have seen periods of massive volatility. The People’s Bank of China has tried to stay ahead of the selling by introducing various stimulative measures.

Will they work?

Further weakness in China could potentially drive deflationary forces further and deeper around the global economy. Without China as one of the key drivers of global growth, how will emerging markets fare? What will happen to commodity prices that have already been beaten up? How will the global economy respond?

You need only look at commodity prices and some other key indicators to see the writing on the wall.

Some of these key data pieces include:
Retail sales
Manufacturing
Emerging market currency values
Junk bond spreads
Freight volumes

The Fed has thus far not been able to spur inflation despite all of the quantitative easing and zero interest rates for several years. In fact, some wonder if inflationary pressures will ever return to previous levels.

Could global central banks continue on the path of QE and low rates? Absolutely…

Could central banks come up with some other measures designed to stoke inflation and prevent an economic collapse? Sure… Will they work? That’s another question entirely…

The fact is that economic activity is not at desired levels. Far from it. It’s possible that further deflation could set in and put a stranglehold on the global economy.

You can choose to ignore these developments, or you can take steps to try to protect your financial future.

In our view, as global markets come crashing down, investors may seek out the perceived safety of gold, silver, and other precious metals.

These metals have stood the test of time and have served as a reliable store of value through thick and thin. Don’t bet your financial future on stocks or paper currencies. Add something to your portfolio with real substance and real value.

Consider an allocation in gold, silver, and other precious metals.

Fortunately, adding these metals to your portfolio has never been easier and more convenient. In fact, you can even set up a precious metals IRA account or buy physical gold and silver in an existing IRA account.

Let us show you how… Explore your options for physical gold or silver ownership today by speaking with one of our account executives. Our professionals will guide you through the process of setting up a precious metals IRA or adding gold or silver to an existing IRA. Don’t wait for falling prices and a bear market to take a bite out of your financial future. Call us today at 1-800-341-8584.