I think you guys need to be careful. I sat down with a bunch of...

I think you guys need to be careful. I sat down with a bunch of German managers yesterday and we kind of did a brainstorming session on inflation/deflation and combed through months of economic data. We also compared our impressions to US data and we found weak inflation in 6/12 categories. However, when we applied forward looking data and observations, we only found inflation in 1 component. i.e. wage inflation has been strong. Thus deflation was occurring in 11/12 components across the board. Low-interest rates are having a negative effect and are not stimulating demand for credit. Therefore, asset prices must fall to induce demand. Not a good environment for gold or copper. Sure, China might rebound if they stop pouring half their GDP down black holes but Europe and the US are stagnant at best. Without strong demand for credit, asset prices will fall across the board. So much for inflation...

Have a look at these 6 components and ask yourself honestly what you think the outlook is - deflation or inflation. CPI may still be an exception in Oz. The supermarket chains are still ripping you off.

1. tangible assets (business assets)
2. wage inflation
3. producer prices
4. consumer prices
5. financial assets (record highs)
6. commodity prices