Thursday, July 7, 2016

Deflation Everywhere

It is common knowledge that we are encountering global deflation. The three sets of charts below show this phenomenon. 

But before going further, let me explain one thing: it is also common knowledge that gold stores value. If that is a case then it could be interesting to show the values of various financial assets measured in gold.

Let me start with hard assets:


The charts show the prices of soybeans, copper, Brent oil and the CRB index, all of them expressed in gold. It is easy to spot that now the prices of these hard assets are more or less the same as in 1980. In my opinion, it is confirmation of the widespread global deflation. 

Now, let us look at the main world currencies, also expressed in gold:


Once again, it looks like all of these main currencies (Euro, USD, the British Pound) are worth less than in the eighties or nineties (depending on the currency).
The only exception is the Japanese Yen, which is worth more or less the same as in the eighties.

Even the king of world currencies, Swiss Franc, has been going down since 1999:


Are there any winners? Look at the charts below:

The charts show a few main world stock indices. And it looks like there is only one winner - US stocks. For example, S&P 500 and Nasdaq 100 are currently trading at higher levels than in the eighties. 

The world stocks index (DJW) has been also going down since the beginning of this century but since late 2011 it has cut part of its losses.

Summarizing: deflation is nearly everywhere, with some exceptions visible in the US stock market.

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