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The Specter of Deflation: Shilling, Prechter and Makin Take a Pessimistic View

Traders Magazine, February 2004

Kathryn M. Welling

Independent economic researcher A. Gary Shilling's last two books have been all about the "D" word, and he is still a true believer. The Elliott Wave Theorist's Bob Prechter's latest book is "Conquer the Crash," in which he talks about a coming deflation and how to cope with it. John Makin, an American Enterprise Institute Scholar, who also works the hedge fund side of the Street, hasn't published a book on deflation, but says he "probably should. I'm really looking at continuing disinflation and the Fed's seeming indifference thereto." And John has written copiously and cogently on same. This trio, quite evidently, are marching to a different drummer than the herd of optimistic prognosticators whose economic predictions already have produced any number of cheery "outlook" pieces this year. So what do they think they see that most economists are missing, amid their celebrations of booming GDP and quiescent inflation? Deflation, of course. I gathered them into a conference call last week, and challenged them to worry me.

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