If you have not yet read The Deflation Monster Has Arrived, available free to all readers, please click here to read it first.

Too Many Warning Signs To Talk About

The deflationary monster is here and there are almost too many warning signs to list, let alone fully describe.

So I’ll just list and link them…you can follow up on the details if you want, it’s the ‘general vibe’ I want to get across.

Here are the signs of a weak economy that we are dealing with:

• Oil in the $20’s (!!)
• Copper under $2
• Baltic Dry Shipping Index at the lowest ever at 383 and down ~50% in the past year.
• Wal-Mart closing 269 stores, 154 in the US.
• Business inventories to sales at new cycle highs
• U.S. freight volume falls for first time in almost three years
• US retail sales fall 0.1% in December
• Empire State index weakens to recession lows.
• South African rand hits new all-time lows in 2016
• Brazil’s Real Falls Sharply Against Dollar
• Brazil Unemployment Rate Rises to 9%
• Canadian Dollar Hits 13 Year Low Against US Dollar
• U.S. Energy Junk Bond Spreads At Record Width
• Nigeria’s Currency Plummets On Open Market
• Mexico’s Peso Hits New All-Time Low
• Chinese Stocks Enter Bear Market (again)
• European Stocks Enter Bear Market

The pattern here is one of rapidly slowing economic activity and mounting pain starting “from the outside in” as emerging markets and the poor people within the core countries bear the brunt at first. Things always get rolling to the downside starting with the weakest, peripheral elements first.

Copper and oil are providing very clear signs that economic activity is not just slow, but in rapid retreat. Wal-Mart tells us that its shoppers are having trouble. The fresh all-time lows in a variety of currencies, plus massive weakness in others, is telling us that the virtuous portion of the liquidity cycle that the Fed, et al., unleashed on the world has entered the vicious part of the cycle.

The pain will spread to the center with increasing speed. The main question is if the authorities can stop that before the momentum becomes too great to halt? And what will happen if they cannot?

The answer to that is…