Philip Gvinter

Cramer: Dow Could Drop Another 14%, Oil's Going to $50

Inflation is no longer the enemy. Deflation is here and here to stay for a while. Is there a single economy which will benefit from a combination of falling consumer demand in the US and EU and falling prices for commodities? The EU and US economies are all over-leveraged and still have credit losses and housing corrections to work through. Under such a scenario China and India have excess capacity for manufacturing (China) and outsourced professional labor (India.) Brazil, Russia, Venezuela, the gulf states and Australia are all commodity producers who will also take serious hits. During a period of global deleveraging and a crisis of confidence investors will run to the reserve currency which is currently the USD and potentially to gold. The issue with gold as a hedge at this point is that it serves no economic purpose and is typically an inflation hedge, one which may not hold up during a deflationary period. Whether through dumb luck or a nefarious conspiracy the US seems destined to keep its position at the top of the hill in the short to intermediate term simply because there are no cash rich buyers in this overleveraged and highly intertwined global economy.