Sunday, February 22, 2009

Deflation: How Can It Be Stopped?

Article essentially says keep your eye on the mood of the people.
clipped from
"You were correct with your predictions of deflation. But now that it's here – isn't the government still in control? Why can't they do [fill in the blank] to stop it?"
There are lots of articles out there – well-written articles written by qualified authors – arguing how the government can do this or that to stop deflation.
In our opinion, they ALL miss one key point: social mood.
Conventional economists look at the deflationary problem in a very mechanistic and cause-and-effect kind of way
Here at Elliott Wave International, we have long argued that this is not how it works. Bob Prechter, EWI's founder and president, takes five chapters in his Conquer the Crash* – which predicted deflation long before it became mainstream news – to explain why; here's an excerpt. (My advice: Do read the book to understand this crucial point completely.)
people are not machines. They get emotional. People become depressed, fearful, cautious and angry during depressions; that’s essentially what causes them
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