Prechter Was Right After All

Yes, Prechter was right on so many issues that I got wrong. He predicted for many years that the dollar would rally at the beginning of the deflationary storm. And that is precisely what is happening now. Sure the dollar was constantly under pressure and declined for years against major foreign currencies and in particular against the Euro. Yet, this trend has reversed completely.

Prechter argued against the notion of peak oil. For quite some time he looked like a lunatic, as the crude oil price pushed relentlessly towards $150 a barrel. The situation looks quite different now. Oil has collapsed below $50 a barrel inside of a couple of months and seems poised to challenge $10 a barrel once more.

Most of all, Prechter predicted that the bull market of the 80's and 90's would end in a deflationary collapse. He was absolutely on the mark here, even though the main stream media is still parading 'experts' in front of the public, claiming that the financial alchemists at the FED are so much wiser today than they were in 1930's.

Prechter predicted that the FED would be pushing on a string, trying to stop deflation. So far he has been right on the money on this issue as well. Despite massive cash and credit infusions by the FED and other central banks, equities, housing, most commodities and prices for goods and services have been deflating rapidly.

Yet the verdict whether they can stop this deflationary bout is not yet in. Helicopter Bernanke and his buddy Paulson have been flying non-stop missions dropping money like never before. Current estimates are around US$ 7.5 Trillion when all is said and done. The stakes are high in this epic drama. If they fail the mighty US dollar and with it the empire will fall.

Prechter predicted that government bonds would initially rise and they have.

Then there is gold. He predicted gold would fall. OK, this one he got wrong. And his timing was off a bit. He believed that deflation would strike after the 1987 crash. I did not. He subsequently anticipated deflation several times – too early. However, his score is nearly perfect as far as what would happen during a deflationary cycle.