When almost everyone believes that the Fed’s interest-rate policies will eventually create awe-inspiring inflation, it’s difficult for other voices to get heard. Bob Prechter argues that the real effect of the Fed’s “extra-credit” policies will be deflation — and that’s what will hamper an economic recovery. He went into the lion’s den recently to talk with the managing editor of the Daily Crux, a financial website that mainly focuses on the inflation side of the argument. In this excerpt from the interview, which runs in full in the June 2010 Elliott Wave Theorist, Prechter talks not only about why the Fed’s action won’t create inflation but also about what might come after we have walked through the valley of deflation. Click here to access the complete segment of the interview.
Deflation first, says Prechter
[Note: The following comes from the latest issue of Elliott Wave Theorist. Bob Prechter is arguably the world’s foremost expert on deflation, and in this interview segment he covers a crucial point in the inflation-vs.-deflation argument. It is a must-read for anyone interested in the topic. RA]