I doubt that it is deflation, Heremes. There's certainly a lot...

I doubt that it is deflation, Heremes. There's certainly a lot of asset price destruction going on of late, but I think it is more likely deleveraging, i.e., funds and many others all offloading as much debt as they can by selling assets. It may go on for some time yet, but soon I think we're going to see the very opposite - inflation - with all the 'helicopter money', as j61034322 terms it, being dumped into the economies of many countries ... something like US$1.8 trillion so far in the US alone. I noticed some time back too that Australia has been inflating its currency (variably 14-18% year on year, if my memory is not failing me) even more than the US ... about the same rate as Europe, I think.

But I'm no economist, so I guess I won't be too surprised if it turns out that I'm the one who's wrong.

Nevertheless, I'm still betting on energy and commodities in the medium term. The Chinese are seeing massive unemployment lately (a friend in Beijing called recently and said there were some 60,000 recently become unemployed) because of the dropoff in exports to the US and Europe. I've no doubt the Chinese will play this for all they're worth in the short term to try to renegotiate lower commodity prices, but I think they will have to ramp up the economy before too long to prevent the disorder that will occur if unemployment becomes too entrenched. I heard one of the pundits on Financial Sense radio last Saturday say that he believed that about 80% of the Chinese economy was internal anyway, so, if he's correct, I'd expect that the loss of the Western markets will not have as big or lasting effect as some are supposing.

cheers,

Tez