I'm often asked how long I think it will it take for the deflationary phase I detailed in Financial Armageddon to play out and for serious inflation to start kicking in.
In all honesty, I'm not sure. My best guess is that we will begin to see currency, bond, precious metal, and other markets pricing in this transition in the latter half of 2009, though it depends, of course, on what tricks the U.S. and other governments pull out of their sleeves and when we start seeing the kinds of social and geopolitical upheaval I write about in my third book, When Giants Fall (due out next month from Wiley).
Meanwhile, fallout from the bursting credit bubble remains a driving force in financial markets and in the economy. In a brief post for The Big Picture's BP Cafe, "Consumer Deleveraging: Only Just Begun?" I highlighted data suggesting that Americans' balance sheet repair efforts are not as far along as mainstream media reports seem to suggest.
Yesterday, the Federal Reserve reported that outstanding consumer credit for November fell a worse-than-expected $7.9 billion, lending support to the notion that the consumer is deleveraging.
However, based on the accompanying graph of year-over-year changes in consumer credit and mortgage debt relative to GDP, it seems like deleveraging has hardly begun.
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