Inflation or Deflation? Which is the Consensual Opinion? Weekly Chart Update – 9/4/11

An update of the weekly google insights chart for 9/4/11. This chart can help the contrarian investor to gauge the prevailing opinion in the inflation vs deflation debate.


I usually post two charts, unfortunately, due to some peculiar things with the data/my file, I’ll only be posting one chart this week. I’ll try to get back to the normal set-up by next week; and if not, I’ll look for a better way to interpret this data.


The chart below uses plain search volume indices from google insights. I attempt to (pictorially) demonstrate the amount of searches for the terms “inflation” and “deflation”. I invert the ‘deflation’ parts (red) to show how the two search items are competing with each other. When the blue parts are high, people are searching for ‘inflation’. When the red parts are very negative, people are searching for ‘deflation’. The yellow line is the aggregate of these two. When it is rising, inflation fears dominate, and when it is falling, deflation fears dominate.


Inflation Vs Deflation Chart - Google Insights

Click to enlarge. Source: Google Insights




At extreme levels, the contrarian investor can seek to oppose the trades of consensually minded market participants. The contrarian can seek to insure against deflation during periods of elevated inflation fears, and seek to insure against inflation during deflation panics.


In previous updates, I warned that there could have been a ‘high’ made in these charts, and that there was a risk of deflation fears quickly taking hold. It would seem that this scenario is very close to being invalidated; inflation searches have started to dominate once more. We should continue to monitor these charts and seek to act when extreme readings arise.


Inflation or Deflation Free Ebook


See here for our collection of rare historical economic data.

Posted Apr 9, 2011