Wasteful Government Spending Declining - Deflation Coming

Pinnacle Digest writes: In this article, Clif Droke delves into the so called ‘recovery’ which has taken place since 2009. Droke explains how the economic recovery has been based on loose monetary policy and the success of American companies abroad - with the exception of some automakers back home.

Droke highlights an interesting point, which further promotes his belief that deflation is on the horizon. His argument for deflation, or at least that it’s coming in 2013, is that government spending is on a rapid decline. And given that this economic recovery was based on government stimulus, his argument is one to be taken seriously.

For the last two quarters, government spending has declined 6.9% and 5.6% respectively.

Droke considers this to be the first early warning sign for deflation and believes we may not start to see it until next year.

Droke points out that consumer spending is at its highest level in 3 plus years which has bolstered Amazon (AMZN:NASDAQ) and Apple (AAPL:NASDAQ) profits. But it is important to remember that consumers are typically behind the curve on what economic events await us. In other words, a peak is a peak for a reason.


Click here to read Clif Droke’s article.