Why July is the Beginning of Financial Deflation?

What has happened to the market?  The deflationary plateau has a starting date of July 11, 2011 until July 11, 2017.  What is causing this deflationary market in the stock market?  There are several reasons for this decline:

1. The consumer is deleveraging all their negative consumer spending items:
credit cards, equity loans, underwater mortgages, student loans, car loans,
and chronic unemployment.  The rise of saving strategies is creating new
waves of spending contractions and spending containment.  This now creates
a goal of being debt free in the USA.  This will stop spending on high ticket
items and collapse of import spending.  China, India, Brazil, and Europe will
experience a collapse of American consumer spending.  This will result in
a new type of Nationalistic protectionism.

2. The financial institutions have experience a vast downturn in speculating
in the shadow banking system.  There is no financial gain to be made in
the newly regulated financial markets.  The real estate sector is in a permanent
collapse until July 11, of 2013.  This means that Banks must work on debt
settlements and real estate settlements for marginal profit zones.  The commerical
banking sector needs to develop innovative financial tools to tap into the the
corporate $800 Billion cash horde.

3. The federal governement is now working on increase regulation in banking
profit zones.  The federal government is looking to cut 4 Trillion dollars from
the budget over the next 10 years.  This means a cut in federal government programs and the Republican leadership needs to increase this to 6 Trillion in cuts.

4. The collapse of commodity prices will be based on the collapse of consumer
spending.  Remember gold in 1980 reached $850 an ounce but 2 years later
went down to$350.00  This means that gold will collapse in July 11, 2011 to
July 11, 2013 to about $900.00 an ounce.  This will shock the commodity
markets.  There is no growing global market due to the paradox of thrift.  This means that consumer will not buy but will save on a macro level of investment.

5. The collapse of the Greek government and the new emerging market rule
is to govern by restraint and austerity.  The Greeks must save and invest in
fixed investments for the future.  There is no extra money for consumer spending
but for consumer savings.

6.  All trading nations will adopt rules which encourage economic isolationism
or economic nationalism.  This means limited growth for the next 5 years.  There
is no extra cash created from bubbles and speculation.  Investors will look for
US treasuries and the return of the king, i.e. THE DOLLAR!

7.The US. real estate market is in a continued collapse until 2013.  Which means
another 25% collapse of the market.  This will create about 80% of the Bubble
markets into negative equity values.  Real Estate homes are the cornerstone for
the equation of Households which create the free market system.  The homes
are the major source of investment for consumers and this 80% of homeowners are underwater and will not be refinanced by banks but by the Federal Government. We
will need Federal Government guarantees to restate the real value of homes.

8. The role of Deflation means the Business sector must provide continued sliding
prices to new lows.  The inventory system is in oversupply and means that the new
supply and demand statistics means the equilibrium prices must be lower in order
to liquidate excess supply.  We need to liquidate inventory supplies which will
take at least 5 years in the major items that consumer buy.  Corporate America
is sitting on a cash horde of $800 Billion which they will not spend down because
they will lose money in contracting market of lower prices.  They need incentives
to spend their money- so they can make more money. 

9.  The State government are in a sliding budget cuts for at least 5 years.  This means that they cannot afford numerous programs and must cut all but the most essential programs that create some type of revenue flow.  Arizona is the poster child for
the collapse of the budget.  The budget expenses exceed the revenues for the next 10 years.  The educational market is being hit by three areas: (1) the Federal Government spending cliff has been achieved and Federal Government is cutting back on all spending programs, i.e. no more revenues from the Federal Governemtn; (2) The
State budget is cutting funding to k-12 and community colleges and universities which
means more layoffs, faculty pay freezes, terminations, new normal of higher tuition,
i.e. Arizona Universities have raised tution by 70% over last 4 years.  This means school district must immediately try to seek bond money from declining real
estate markets. (3) The property market can no longer support various k-12
investment schemes because the money is no longer there via deflationary
real estate values and the need for cost cutting budget or return to Zero based
budgeting for school districts.

10.  The ultimate problem is that according to Dr. Schiller the stock market is
over-valued by 40%.  This means a correction will devastate the future earnings and
investment of the stock market for at least 5 years.  We have a problem in that
the stock are over-valued and markets or exchanges must come down by 30%.
The gift of growth is over and market will have to re-evaluate its real value.

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