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In 1929, Deflation Started in
Europe Before Overtaking the U.S.
What Happens in Europe Will Not Stay in
Europe
November 29, 2012
By Elliott Wave
International
More than 1,500 years after the fact, scholars still
debate the causes of the Roman Empire's fall.
What historians do agree on is that
the crumbling empire's final days were marked by economic contraction,
a struggle to fund Rome's routine affairs and excessive debt.
Sound familiar?
Mark Twain said, "History doesn't repeat itself, but it
does rhyme."
That quote seems to apply when economically comparing
the Roman Empire and the United States.
Today's superpower also faces a mountain of debt and a
slow economy.
Unlike then, however, the modern economy is
global.
So an economic downturn in one major area of the globe
is likely to affect another. In fact, even during the Great Depression
(long before the phrase "global economy"), Europe was exporting to
America.
But one historic export was not the kind that the U.S.
welcomed.
The economy is clearly vulnerable to a debilitating
wave of debt deflation. The threat is approaching quickly from an
important source: Europe. The same sequence of events occurred in 1929,
when deflation started overseas before lapping onto U.S. shores.
The Elliott Wave Financial Forecast,
January 2012
The Financial Forecast has long kept a careful
eye on the threat Europe's debt crisis poses to the U.S. economy.
The economic slowdown that EWFF characterized in
January as Europe's "top export" is finally reaching foreign shores.
Several financial news outlets report that the U.S. and China are now
"slipping in sync" with Europe.
The Financial Forecast, June
2012
And recent news registered the economic slowdown.
- Small Businesses Grow Wary; See Fewer Hires --
Reuters, Oct. 9
- IMF Slashes Forecasts for Global Economic Growth --
CNBC, Oct. 8
- World Bank Cuts East Asia GDP Outlook, Flags China
Risks -- Reuters, Oct. 7
- Europe's Richer Regions Want Out -- New York Times,
Oct. 7
- Entrepreneurship is 'weaker than ever' -- CNNMoney,
Oct. 5
- The U.S. unemployment rate tumbled to 7.8% in
September but a broader measure was flat at 14.7%.
[emphasis added] - Wall Street Journal, Oct. 5
- Orders to U.S. Factories Plunge -- Bloomberg, Oct. 4
- Spain's Tax Take Tumbles as Companies Go Abroad --
Reuters, Oct. 3
- Trade Slows Around World -- Wall Street Journal, Oct.
1
Indeed, the European Central Bank recently initiated a
new bond buying plan, the Bank of Japan just expanded its asset
purchase and loan program, and the Federal Reserve announced QE3.
But don't count on central bankers to rescue the global
economy.
Consider what Robert Prechter said in the July 2012 Elliott
Wave Theorist:
The Fed's actions are short-term inflationary
but are setting up a bigger crash than would happen otherwise.
Why do The Fed and other central banks around the world
keep making these types of mistakes? You can find out for free. See
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This
article was syndicated by Elliott Wave International and was originally
published under the headline In
1929, Deflation Started in Europe Before Overtaking the U.S..
EWI is the world's largest market forecasting firm. Its staff of
full-time analysts led by Chartered Market Technician Robert Prechter
provides 24-hour-a-day market analysis to institutional and private
investors around the world.
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