Deflation

"The shift in attitude toward more reliance on markets and the private sector to allocate the nation's resources and away from inflationary government will last for many years."

"With relatively more [older people], and fewer of the younger big spenders who are forming households and raising families, consumer outlays will moderate throughout the developed world."

"The combined effect is to depress prices economy-wide, as the high tech sector, with its rapidly declining prices, becomes a sharply rising share of total economy activity."

"Deregulation is deflationary. It opens to the bracing winds of competition areas where prices were previously fixed, and, consequently, where producers had limited incentives to cut costs and promote productivity."

"As the buck rises, foreigners can reduce the prices of their exports to American dollars and still receive the same number of yen, D-marks, or baht. This, in turn, encourages U.S. imports, to the detriment of domestic producers."

"In the years ahead, there will be fewer people in their twenties and thirties who spend a lot and save little as they form households and raise families."

"Deflation is also self-feeding in the business arena as firms wait for lower prices before investing in inventories as well as new plant and equipment, and capital spending is also depressed by excess capacity."

"The Kondratieff Wave has two points of current relevance. First, in the ongoing final down phase that we're now in, deflation is the norm. Second, the new technologies that will drive the next up phase are already well known and growing."

"Good deflation requires not only a lack of a demand-depressing financial collapse, but also a leap in supply. In the late 1800s and in the 1920s, good deflation was driven by new technologies. It will be this time as well."

"With chronic deflation of 1 to 2 percent, I foresee 30-year Treasury bond yields returning to 3 percent . . . If so, then what we dubbed "the bond rally of a lifetime" back in the early 1980s is still underway as yields fall further."

"I favor bonds over stocks in the transition of deflation."

"Diversification doesn't work for American investors because bear markets tend to be global but bull markets aren't as consistently so."

"In deflation, it's existing buildings' rents that will feel the heat as new buildings benefit from cheaper construction costs and lower land prices."

"It is said that a rising stock market makes geniuses out of idiots, but a falling market makes idiots out of geniuses."

"New technologies like semiconductors and computers are well acquainted with deflation, create rapid obsolescence for their products, help their customers promote productivity, and open vast new markets as prices fall."

"The stock market gains on your savings over the years could largely evaporate in the next big bad bear market, whenever it comes?and it will, sooner or later. "