Economist Expects Commodity Deflation

Beefs and Beliefs

Worldwide bear market to drive down commodities and all other goods and services.

Published on: June 7, 2012

My favorite economist these days is Bill Helming, the Kansas-City-based private consultant who was once the first official economist for the National Cattlemen's Association.

I've written about Bill before because he has, since 2007, consistently called this depression we're in correctly, although not always exactly on time. Who can complain about that record?

It's certainly better than the folly that flows from the federal government's stable of economic hacks or from the glassy-eyed hoorahs the national news media parrots regularly, all of them immersed in the Keynes-speak piled high in the nation's out-of-touch ivory towers.

Helming, on the other hand, has evaluated the macro-economy and looked at long-term boom-bust economic cycles and has called this shovel a danged old spade.

Helming notes in his latest special report to his clients that the fundamentals of the world economy continue to be a wreck in the making and that many of the economic indicators that matter have now turned down on major chart patterns.

He reiterates that the US and Europe are drowning in the debt of self-inflicted socialism and public and private spending binges. He has repeatedly warned that all this debt will be deleveraged and that will further slow the economy, contributing to deflation.

Now the CRB Index has shown major down moves on daily and monthly charts.

As Helming explains, the CRB Index is a composite of several commodities which trade on the commodity futures exchanges in the U.S. and also globally on a cash and futures market basis, using the U.S. dollar as the medium of exchange on a worldwide basis.

It measures price movements for 22 sensitive basic commodities whose markets are presumed to be among the first influenced by changes in economic, financial, inflation/deflation conditions, and supply and demand forces and trends.

The index has two major subdivisions: raw industrials and foodstuffs. The raw industrials include burlap, copper scrap, cotton, hides, lead scrap, print cloth, rosin, rubber, steel scrap, tallow, tin, wool tops and zinc. Foodstuffs include butter, cocoa beans, corn, cottonseed oil, hogs, lard, fed steers, sugar and wheat.

Helming notes the daily CRB has declined significantly during the March, April and May of 2012.

"We are now in the early stages of a major and longer-term bear market for commodities," he says.

He says the Dow has taken a significant move downward and crude oil has broken through some important support resistance on its charts.

He adds the supply and demand fundamentals and economic and financial fundamentals for commodities generally point toward a major and important bear-market trend for much of the 2012-2017

time period.

He says, "Obviously there will be periodic, very significant rallies in commodity prices over the next four to six years, but the dominant trend in commodity prices will very likely be down and not up for a good part of the next four to six years. You should plan and prepare accordingly."

Previously and in this report Helming warns we are headed toward general price deflation, including prices for all commodities, farmland, housing, labor, stock and most other equities, food, transportation and energy costs.

If you have not read his book, What Goes Up Eventually Comes Down, I urge you to order one from him now and read it. You can get his book or subscribe to his newsletter by calling him at (913) 768-6540.

The purpose of his warnings isn’t panic, as Helming always makes clear in his correspondence and personal communication with friends and clients, – it’s about being prepared and hopefully even profiting from this situation in the long run.

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  2. Anonymous says:

    If you listen to this "economist" forecast on the general direction and price levels of commodities you are going to be disappointed and lose a lot of money. A simple analysis of true supply and demand fundamentals of commodities in general would tell you we have shortages of everything. If the world economy gets better commodities will do well because of fundamentals. If the world economy does not get better governments will print a lot of money. We do not live in the 1930's and governments are no longer subject to a gold standard. Keynes lived in a world in which the gold standard ruled all macro economic thought. He couldn't conceive the world of floating exchange rates. Please do not subject yourself to the dogma of deflationists arguments that everything is going down. During historical periods such as today, the way to protect yourself during rapid currency debasement and structural deficits is to own real assets. The United States is the largest debtor nation in world history and the U.S.$ is a terribly flawed currency. The average age of a farmer in the U.S. is 58 years old. Within 10 years, we will have no farmers unless prices go way higher and attract new labor, capital, and productivity. The "invisible hand" will work it's magic.

  3. Anonymous says:

    If you listen to this "economist" forecast on the general direction and price levels of commodities you are going to be disappointed and lose a lot of money. A simple analysis of true supply and demand fundamentals of commodities in general would tell you we have shortages of everything. If the world economy gets better commodities will do well because of fundamentals. If the world economy does not get better governments will print a lot of money. We do not live in the 1930's and governments are no longer subject to a gold standard. Keynes lived in a world in which the gold standard ruled all macro economic thought. He couldn't conceive the world of floating exchange rates. Please do not subject yourself to the dogma of deflationists arguments that everything is going down. During historical periods such as today, the way to protect yourself during rapid currency debasement and structural deficits is to own real assets. The United States is the largest debtor nation in world history and the U.S.$ is a terribly flawed currency. The average age of a farmer in the U.S. is 58 years old. Within 10 years, we will have no farmers unless prices go way higher and attract new labor, capital, and productivity. The "invisible hand" will work it's magic.