The deflation is manifesting as stagflation – when stock markets crash how nasty will it be?
Peter Oberois
Apr. 15, 2007

The Federal Reserve is now accepting something they denied for the last twenty years. The stagnation in the economy comes from the lay off of millions from large corporations and shifting jobs whole sell to India and China. The inflation however was subdued all along but never disappeared. The money supply was abundant to outweigh the underlying deflation to make the economies look stronger than they are.

The deflation is finally catching up. The Federal Reserve now understands how vicious and stealthy the deflation is. The manifestation of deflation comes from defiant long bond yields. The long-term bond yields are actually so low that the yield curve is slightly inverted. It is because of the deflation. The deflation now will take thirty tear bond yields well below 4% - perhaps close to 4% in the next eighteen months.

When stock markets start crashing, it wills a blood bath in every corner of the financial Mecca of the world. Every country will suffer massive stock market crash simultaneously. Most likely, it will be triggered by Japan with sudden but massive rise in Yen. Currency adjustments in China and other emerging nations most like will cause the global depression that will continue for twenty or years.

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