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Elliott Wave International President Bob Prechter on why deflation is to blame for Europe’s economic crisis and the U.S. low interest rates.
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Actor Robert practice rules -- bear market he's been predicting is all coming together rather nicely.
A rather rudely and maybe rather abruptly Robert of course the guy -- does sex slaves once defined.
A bull market for a generation Bob Bob now seeing some -- -- reverse the just might last a generation and nothing Bob I guess you're seeing.
Is altering that new home.
Neil would you like to know what the -- word is I would there's a seeker -- -- Explain just about everything that's going on and it's not being talked about enough some people -- -- a few times recently.
That word is deflation.
Explains what's going on Europe explains why we have the lowest interest rates in the history of the United States on the ten year and also on the treasury.
Bills.
Explains why we've had.
-- markets very important markets like the real estate market down more than 40% the entire commodity complex down more than 40% only since.
2008 and that includes oil and silver two -- the most ballyhooed markets out there.
We also I'm I'm sure you reported recently the drop in the velocity of money.
It's -- lowest in fifty years of data I think the lowest since the thirties.
And then we found out that in -- the CPI actually went negative all of these things parent about -- do you play.
He reseller placing -- I think the differentiator here from what it's happened like in Japan fifteen years ago when it was we thought localized to Japan.
Because this is a worldwide phenomenon that why does that make it dangerous and play out what happens -- Well what's going on in Europe Europe's a bit ahead of the United States right now the Fed in our government have been very very aggressive.
They've tried to make up for the deflationary pressures so the Fed took on two trillion dollars worth of new debt onto its balance sheet turned it into money.
Our federal government and -- it's also been lending like crazy as you know -- lend for seventy years in the housing market look how that turned out now they've looked away.
Thank -- what the Fed did today to add another 270 billion to that I guess bill.
Well he's a little avail I might point out at least today but what do you make -- -- Well I what I make of it is if you're going to try to solve -- systemic debt problem where there's far too much debt throughout the whole system adding new debt is not a great way to do it.
And one of the things -- federal government has done of course is that one trillion dollars.
To us student loan debt this is another way to make up for the consumer debt that's not happening.
But you know this is always like the united set about this before Bob this sort of financial good we've been waiting and waiting and waiting.
And all the ingredients are there for a debacle maybe -- biblical proportions.
But he that we whistle past the graveyard are we -- -- because the rest of the world seems even worse off than we are that the United States.
And our great draw -- our securities treasuries and otherwise double still stay the case but what say you.
Well one of the big ironies of this whole period especially since 2006 when deflation really started take hold is that most investors have been going the other direction.
They're investing in things that they think are going to reflect the future inflation hyperinflation it's coming so they bought the metals about the commodities they.
We're still trying to buy real estate now although they're playing more foreclosures coming there.
But the move the market that's most -- the one that really hasn't paid the price -- as the stock market.
I think you still think there's too much optimism I think we're having a bear market rally and we're going to have the results show up there eventually as -- more job cuts.
-- -- out -- sort of more markets not around these levels the doubt around 121800.
Substantial.
What do you envision played this not so rosy script down.
All right well I think the real tough in the market was April last year that's when the New York composite index topped that's all the stocks in New York Stock Exchange.
The blue chips came around essentially double tops in April of this year that's -- the Dow and the S&P and NASDAQ went to new highs.
But we had a lot of non confirmation -- transports and goes.
The that NYSE composite since we set up in my opinion a bear market or the resumption of a bear market at that point.
We had a big down may we've had a rebound now it's about 60% retracement two thirds in the Dow.
I think to -- about over and ready to start down again aren't too how -- -- -- that went flawless set and a well how I think if the initial drop was 2007 to 2009 that was a five -- structure under Elliot wave model.
We've been through and where we were were are now -- Right I think that was only the first -- so I think eventually we're gonna take out.
Last year's low and then we're gonna eventually take out the 2009 -- so I'm saying safety is the key that's for you wanna be for now is -- bear market bottom I think -- know it -- -- on that happy you know about record I think thank you very much.
I always enjoy your show thanks thank you -- will --
