Deflation: How to Survive and Thrive in the Coming Wave of Deflation

Shilling sees several forces feeding the trend toward deflation, including the end of the cold war, reduced government spending, growing surpluses, the widespread adoption of technology, the emergence of the Internet, deregulation, and the recent Asian contagion. He also believes that the stock market is due for a severe correction that "would destroy enough individual wealth to chase consumers out of spending and into a saving spree," thereby slowing demand for goods and services and encouraging deflation even more.

Among the investments that Shilling recommends for deflationary times are treasury coupons and zero-coupon bonds, utilities, and U.S. stocks (after the correction, of course). Given Alan Greenspan's maniacal focus on fighting inflation, it might be difficult to swallow Shilling's deflationary forecast. Nevertheless, Shilling has done his homework, and it shows: he builds a case that's both convincing and easy to read. No one knows for sure what our economic future holds, but any open-minded investor would be prudent to hear Shilling out. --Harry C. Edwards

Product Description
Were you to have followed Shilling's advice in the early 1980s, you would have been a full participant in the 15-year bull market in both bonds and stocks that ensued... his analysis, as usual, deserves careful consideration.-- Bruce J. McCowan, Former Chairman, McCowan Associates, Inc. In the early 1980s, Shilling was one of the first to raise the possibility of disinflation … At the time, he was considered extreme, but that's just what happened. Now he's considered extreme once again. We'll see--Terry Savage, Personal Finance Columnist, CHICAGO SUN-TIMES. Were you to have followed Shilling's advice in the early 1980s, you would have been a full participant in the 15-year bull market in both bonds and stocks that ensued...his analysis, as usual, deserves careful consideration.--Bruce J. McCowan, Former Chairman, McCowan Associates, Inc. Remember the days of inflation? The days of double-digit price increases, inflation-fighting sales at the local market, buying today before prices increased tomorrow? The era of inflation is over, says, A. Gary Shilling. He should know. He was among the first to predict the demise of inflation 20 years ago. Now he says the economy is entering a period of deflation, with chronic and widespread declines in prices that will affect people's investments, their businesses, and their personal affairs. And he shows investors how to craft a portfolio that will shield their capital from loss as it continues to increase their wealth in deflationary times. Dr. Shilling is the influential forecaster and Forbes columnist consistently ranked among the leaders by The Wall Street Journal, and twice voted Wall Street's top economist in Institutional Investor's poll of financial institutions. In Deflation, he sounds a clarion call for forward-thinking investors everywhere. A number of factors--including the end of the Cold War, the increasing popularity of the Internet, the new era of government surpluses, and increased competition, deregulation, and free-market economies worldwide--are joining to usher in a new, and unfamiliar, era of deflation after more than six decades of inflation. Shilling tells why the coming inflationary era will be a positive development, spurred mainly by the rapid development of new technologies and increasing supplies of almost everything. And he shows readers how to navigate their way through a rough transition period that will be sparked by a significant decline in today's overpriced stock market. Investors, businesspeople, and individuals will all profit from Dr. Shilling's exhaustive research and lively, easy-to-understand writing style. For those looking to survive--and thrive--in the coming wave of inflation, this book will be an essential guide, providing specific investment and business guidelines, including: An 18-point investment strategy for creating your own bull market--during both the transition to deflation and the deflationary era itself; How to steer clear of the Asian Contagion and which global hotspots are most likely to be infected; Why bonds will outperform the stock markets--and which bonds should be strongest! Long-buying and short-selling strategies to profit from both the winners and losers during deflation; A 25-point plan--including ruthless cost cutting and low inventories--that will help your business survive and thrive during deflation. While the road to deflation may be bumpy, today's deflation will not spell another Great Depression. In fact, Dr. Shilling foresees as a period of 'good'deflation in which, in the long run, technological advances and increased competition may even serve to boost real income and productions. But you will have to reshape your thinking, sharpen your skills, and re-orient the focus of your portfolios. Businesses will have to develop new strategies. Individuals will have to retrench and find new ways to save money. Ignoring Dr. Gary Shilling's well-researched forecasts has often been a mistake--an expensive mistake. Don't miss this chance to read Deflation and prepare for tomorrow's dramatically different economic environment. It may be the best investment decision of your lifetime.

Talking finance without graphs is tough for the reader so I give kudos to Mr. Shilling in this regard.

As I like to say (and Mr. Shilling points this out), the 1980's was the age of government spending. The 1990's was the age of the consumer buying binge as individual debt levels have soared. The average person has $8500 in credit card debt vs. 2500 in 1990 to put it into perspective.

Moving forward, what will drive top-line growth in worldwide sales? - Did you know that the G-8 countries account for roughly 80% of total purchases worldwide and, as a result, weakness in those countries dramatically affects the world economy?

Will we end up with too much capacity due to stagnant growth or a retraction in corporate spending?

What will be the catalyst to drive economic growth? - The government has over $5 trillion in debt, corporations and individuals are tapped out and factories are running at about 76% of their utilization right now.

Buy the book........Read the book........Anyone can learn from this........By the way, bond prices have already soared so the easy money in bonds has been made.........

...If you are interested in economic history book I would encourage everyone to read The Worldly Philosophers by Robert Heilbroner since it is more international in scope and deals with the lives and times of the most famous economists in history. If you are interested in economic development I would encourage you to read Hernando DeSoto's Mystery of Capital but note his lack of focus on corruption in certain countries. A great general business book is by the management guru Peter Drucker entitled "The Essential Drucker."


Changed My Investment Strategy Overnight   August 25, 2001
Charles C. Dunlap (Houston, Texas USA)
17 out of 18 found this review helpful

I bought a bunch of investment books while on vacation, and this book by Gary Shilling was the last to be read only because of its relative size. First I looked at the date it was written, then thought about what he was saying, especially in his look-ahead comments, and he was "spot on" about today's environment. As a result, I moved 100% to the sidelines at the end of July, 2001, and have been smiling ever since. I then asked my wife to read it, and we both agree that Gary is most accurate in his assessment of economic trends. I was so impressed that I purchased his monthly "Insight" report. The book is a "must read", especially for those nearing retirement and must conserve their capital.


Prescient.   May 28, 2003
Gaetan Lion
10 out of 10 found this review helpful

I read this book years ago just when it came out (mid 90s). I did not pay that much attention afterwards. I thought at the time, it was mildly interesting. Man was I wrong. This book was right on the money half a decade ahead of time. In his book, he depicted perfectly well all the trends that would lead to a rather formidable deflation factor. At the time he wrote the book, Japan was probably close to entering its deflationary phase. But, no other country was. The rest of the World's central bankers were still busy fighting inflation.

Now, the picture has changed radically, and Gary Shilling anticipated current economic times perfectly


Very insightful!   July 19, 1999
8 out of 8 found this review helpful

While this book is very much a re-publication of his original "Deflation" book, Gary has cut back on the number of graphs and charts, and added new content on recent developments.

While at first I wasn't too pleased to be re-reading the original book in new packaging, I found it very valuable to review the numerous points Gary makes along with some updates on his insights.

This book is currently the best on the subject and makes a lot of sense. Some have argued that Gary is out to lunch, but he is the only one I know who is prepared to address these issues intelligently.

And for those who complained that "Deflation" did not have an index, they'll be pleased to know that this McGraw-Hill edition does!


Right on the money   August 2, 2003
Edster (Nashua, NH United States)
8 out of 8 found this review helpful

The author predicts certain economic conditions when the book was published in 1999. A stock market pullback has since happened. Rents in the Boston Market have declined for the last two years. Deflation pricing on goods that can be manufactured in the 3rd world. Quite remarkable.

He's wrong on some of the trigger mechanisms and admits that he may be. (Who could have predicted 9/11, or when the fed would raise rates..., or the bond rally causing a current real-estate bubble.)

Other authors try to scare you with hype or wave theory garbage. This book backs things up with hard data and graphs from different economic periods that run similarities. Then he explains the mechanisms at work that will drive the deflationary process. Also explains how much of it is beyond the control of the feds short term rate mechanisms.... Could be why the fed isn't jawing about it, just hoping it won't happen.

Five stars, read it. If it happens, you'll be prepared. If it doesn't happen, you'll be better educated anyways.