ALERT! Deflation!

While worrying about inflation, suddenly I realize that my problem is DEFLATION. Maybe it was wrong to accept bank loans, even at low interest rate. Israeli concerns are defaulting on their bonds. European sovereign debt is being subjected to haircuts. This is important. Copied from elsewhere:

When enough people and businesses default on their debt, they set off a chain reaction. Banks, hurt by loan defaults, have to raise capital to cushion against further losses. That means selling profitable divisions, because those are the only divisions they can sell. As profitable divisions get chopped off, bank stock prices fall, banks lend less, and the economy grinds to a halt. Already, European banks such as Banco Santander and Deutsche Bank are peddling highly profitable ventures, such as Deutsche Bank's asset management business.

And your neighbor's foreclosure may be part of a larger trend. "Any surge in debt-repayment problems are a byproduct of a deflationary trend," says John Lonski, chief economist for Moody's Analytics. "The inability to pay off debt usually flows from two things: Either your cash flows are less than anticipated or the value of the collateral declines precipitously." (J.: TRUE. Nahi Dankner's investment in Credit Suisse stock lost 50% of its worth, and the whole pyramid is collapsing!!)

Most individuals have seen their income tumble. As unemployment has soared, businesses have discovered that they can get away with paying employees less or withholding raises. Median household income fell 2.3% in 2010, according to the Census Bureau. And many of those who have been laid off have to take a lower salary than the one they had before.

Companies have also found that bankruptcy filings can force employees and unions to accept lower wages. Towns and cities, struggling with labor costs, could also start looking at bankruptcy as a way to force wages and benefits downward, Lonski says.

Another source of falling wages: competition from overseas. Factories in China and the Far East can produce goods at much lower labor costs than the U.S. The result is a relentless downward push on U.S. wages, particularly among unskilled or semiskilled labor.

"Germany paid a negative yield to investors at a debt auction, joining Switzerland and the Netherlands." What? Negative yields? That is the DEFINITION of deflation. The crisis is coming to its dénouement and it seems to be a long period of deflation and depression, like Japan's lost years (it keeps losing them even today).

I am indebted and fear chills my blood; may be I slept too much and my blood has a high level of serotonin. But I shall not be paralyzed because "Fear not my servant Jacob, and be not dismayed Israel: for I will save you and the Jews in the Galut too; and Jacob will relax as there will be none to frighten you."

OPERATIVE CONCLUSION: Focus on high yield SAFE bonds!

Pic.: Ken Katzen. Jacob and the Angel. I like it, KK sees that mysterious dream as no one saw it before.