The Drum Beat of Deflation is Growing Louder: The Intermarket Picture

The global macroeconomic picture is sending out a message and that is one of deflationary forces starting to take hold.
In past articles it was discussed what this means and its likelihood. With each passing day the probability seems to grow and global central banks are beginning to take action (Bank of Japan and the People’s Bank of China) orlooking more likely to take aggressive action (European Central Bank).
It is safe to say at this juncture that the Federal Reserve is watching this all unfold and will probably be forced to wait to raise interest rates. This article will examine some of the asset classes that are being affected by deflation as well as those causing the deflation themselves.
The Big Gorillas in the room: USD and Oil
Unless you live under a rock, you will have noticed the price of oil has collapsed in epic fashion (see chart below). I have included a chart which goes back to 1982, to show the historic nature of this collapse and where possible support lies (around the US$40 area) now that we have broken through several key support levels.
To put it simply this decline in the price of oil as well as the velocity of the decline matter and matter greatly from a deflationary standpoint. Generally speaking, this decline was so swift and fast that the damage, which has been wrought, won’t be known for a while. Falling commodity prices can be dealt with by companies and nations when they are orderly, but when they fall at such speed it leaves widespread damage.

This post was published at Coin Telegraph on 2015-01-08.