Expert Commentary

The Deflation of Deflation

There is increasing complacency over the possibility of deflation.

The technological revolution over the past few decades has resulted in incredibly valuable data becoming readily available. One of the best sources is Google Trends where you can investigate the search engine for results on what people are looking for. It frequently provides useful insights.

The chart below shows an index level for searches on the word “deflation.” It graphically illustrates how deflation has been viewed as less and less of a threat over the past 13 years. Searches for deflation on Google skyrocketed as the Global Financial Crisis tore through the world back in 2008. Then, of course, the Federal Reserve stepped in with its counterfeiting money program (known as Quantitative Easing) and the immediate threat was viewed as receding. The next big spike in deflation searches came in 2010 as the stock market puked on the so-called Flash Crash, a violent but brief collapse. However, the level of concern over deflation as measured by Google searches was below the previous spike peak.

Crude oil plunged during 2014, falling below $50 per barrel in January 2015. This coincided with another flurry of interest in deflation but, again, it failed to reach the previous peak of concern. Finally, when World War C started (aka the Covid pandemic) and stock markets crashed, there was renewed interest in deflation. However, it was just a blip compared with 2008.

What does this tell us?

One way of interpreting this data is that people now do not see much threat from deflation. The Global Financial Crisis was undoubtedly a shock to most people (although not Elliott Wave International) and the response by the Fed was viewed as saving the financial system from collapse. Subsequent stumbles in the stock market and the economy have been met with at least the threat of more QE, culminating in the “all-in” historic surge in money printing at the outbreak of World War C.

Our view is that central banks such as the Fed did not save the world in 2008 or, indeed, now (or, ever for that matter). At this juncture, social mood is so near peak-positive that people believe the Fed will never ever allow the stock market to decline, and deflation is hardly a consideration. Chairman Powell’s recent testimony before Congress was nothing short of a mutual lovefest between the two entities. (

If our view on the stock market is correct, we expect interest in deflation to boom, perhaps as soon as this year.

Deflation Seen As Increasingly Unlikely