We decided that it was worth sharing our views of the inflation/deflation debate with all of our readers.  In our weekly newsletter we are already positioned to take advantage of some of the current as well as potential trends that will benefit from our scenario.

The following are our views on different parts of the puzzle that show that we are currently in, and will likely be experiencing deflation for longer then most people seem to think.

Savings-

Here are some interesting, and unfortunately not surprising, savings rate numbers.  The current savings rate is 5.7%, the all time high in 5/1/75 was 14.6%, the all time low was in 8/1/05 with a savings rate of -2.7%, the historical average is 6.8%, and the 10-Year average is 1.7%.  As you can see in the chart the past year has seen a huge uptick in the savings rate as consumers are

Ben Bernanke and Hank Paulson are planning the biggest bailout of financial markets in history. It could cost the taxpayer somewhere in the region of $1 trillion. But the market will triumph over the interventionists, says Bill Bonner.

The biggest credit bubble in history is due a correction, and there is little the Fed or Treasury can do to stop it. The more they try, the more money they have to print.

This makes the outlook for the dollar and US Treasury bonds ever more perilous… and the outlook for gold ever more attractive.

This from The Daily Reckoning:

There’s a war going on…a battle between a natural market correction…and an artificial attempt to avoid it. On the one hand, Mr. Market wants to correct the excesses of the boom/bubble period that began in 1982. On the other, Misters Bernanke and Paulson want to prevent him. Mr. Market takes down asset prices. Mr. Market …

I have been bearish on government bonds since March this year and have repeatedly warned that they were an overpriced asset class, saying at the time: “… one should be cognizant of the fact that an investment in a 10-year Treasury Note will by definition lock in a total return of 3.5% over the next 10 years. This sounds unsustainable and I find it difficult to see the long-term investment merit of such an investment. Long-dated bond prices could be hit hard once yields adjust to more realistic levels.” (See “Long Bonds in Injury Time”, March 28, 2008.)

Although rising bond yields have been given a reprieve as a result of the deteriorating outlook for economic growth and commensurate safe-haven

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