World bourses are falling and bonds are rising because people expects deflation. As Krugman explains
when prices are falling, just sitting on cash becomes an investment with a positive real yield – Japanese bank deposits are a really good deal compared with those in America. And when that happens, the economy may stay depressed because people expect deflation, and deflation may continue because the economy remains depressed.Mentioning Japan as an example of what can be happening to America makes me feel worse. A year ago I bought a few dollar denominated Bonds of the State of Israel and they made 8%. This is looking more and more like a prolongued depression. Maybe I too should get out of the stock exchange.
Reflexion: Who will profit from deflation? The Chinese. America's debt to China will have to be repaid with more valuable dollars. It is unbelievable that the USA is doing this to itself.