Setting the Record Straight: Answers to Comments on YouTube About Deflation, Robert Prechter, and the Elliott Wave Principle

Comment 1: "I think it is very good that there is now a discussion about The Fed and the things that are done. Two or three years ago, it seemed like nobody (other than Peter Schiff) on the news talked about. Now people are beginning to take things seriously."

Answer 1: Before two or three years ago and before Schiff there was Robert Prechter and Ron Paul. For example, Robert Prechter published Conquer the Crash in 2002.

The primary reason people are just now 'beginning to take things seriously' is because it's not what they see on TV but it's actually happening to them: i.e. the value of their homes (stocks, funds, bonds...) collapsing... loosing jobs and not being able to find employment thereafter... realizing that their bank is not so friendly anymore...

Comment 2: "I don't follow Prechter but heard him with same guy last week. He was thoroughly questioned & I was surprised at some core diversions from Misesian monetary logic & a reliance on "knowing" with his "waves" & "socionomics" that deterministically American society would act like his grand cyclical sociological insights prescribe (express their desire for saving exclusively in the US currency unit) overwhelming everything irrespective of Bernanke/defecits/congress/Chi na etc. Prechter is flaky."

Answer 2: Look a Prechter's track record, from 1979 (when he left Merrill Lynch) to today, and you'll change your mind about him:

Using the Elliott Wave Principle ('his "waves") he forecasted a long-term reversal lower in gold (February 1980) and a long-term "super bull market underway" in stocks (October 1982). These forecasts proved correct—especially for the stock indexes.

He won the U.S. Trading Championship in 1984, with a then-record 444% return in a monitored options trading account. He was named "Guru of the Decade" by the Financial News Network (now CNBC) for the 1980s. AND, he forecasted a large-scale bear market, as explained in his book Conquer the Crash (published in 2002), which was his platform to forecast and explain every chapter of today's financial crisis, years before it happened!!

Does that sound flaky to you? So you should listen to what he has to say and follow his lead. Don't listen to or follow Bernanke and Congress. It is they who are flaky.

Comment 3: "I dont think that the deflationist know they are spinning B,S. If we were in a normal economy with low debt we would have deflation. However we dont have that. WE have a debt laden economy. So we will have inflation."

Answer 3: The tide has turned: the exceptional volume of credit, of debt, has reached its limit and the trend has reversed. Thus, the supply of credit, and therefore the supply of money, has shrunk, which are effects of deflation.

Add to this the deceleration in the U.S. economy which has stressed debtors’ abilities to pay and you'll see that it is precisely because 'WE have a debt laden economy' that we have deflation and are going into a deflationary spiral toward depression.

What's scary is that it is just getting started and deflation will continue for years to come. So it is not B.S and there is no spin.

Comment 4: "Dr. Marc Faber - Sept 12, 2009 - I think the deflationists are wrong for the simple reason...the Federal Reserve can print money...you can electronically print money & so the quantity of money goes up. You can transfer any asset from the private sector into the govt...so many mortgages have been transferred to the govt. They will have continuous huge losses. So, I think that deflation is pretty much out of the picture. Deflation would manifest itself in a strong dollar. The dollar is weak."

Answer 4: The Fed's primary function, for more than 90 years, has been to foster the expansion of credit and credit is another matter entirely. Credit is not money and Faber is confusing credit creation with money creation.

U.S. bonds are the reserves of the Fed and U.S. bonds are the source of its power. Therefore, the U.S. government does not want its bonds to attain (official) junk status, because its borrowing power is one of the only two powers over money that it has, the other being taxation.

By flooding the market with money, the Fed would cause a panic among U.S. bond-holders, and their selling would depress the value of the Fed's own reserves. So the ivory-tower theory of unlimited cash creation to combat credit implosion would meet cold, harsh reality resulting in the Fed committing suicide by doing just that.

As Ludwig von Mises said in Human Action (p.572), "There is NO MEANS of avoiding the final collapse of a boom brought about by credit expansion."

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Inflation or Deflation? Which will Win?

The most important thing to remember about the inflation vs. deflation debate is that this financial crisis is about the expansion and contraction of credit.

As we all know, "we've a debt laden economy," and when people are on the verge of defaulting on their loans, they will sell everything to stay afloat and maintain their standard of living. If they don't, then their creditors will.

But during deflation practically no one buys so debtors remain on the margin of survival or default.

To add insult to injury, due to the contraction of credit, these debtors can not get any more credit and the vicious cycle continues. So as of late, it is not just debtors that are on the edge. Creditors are on the edge because the debtors can not pay their debts; corporations are on the edge because their sales have collapsed and they can not pay their debts nor get lines of credit extended; and now governments are on the edge because this is a SYSTEM-WIDE collapse and there is nothing they can do about it.

So what we have had and are going through at the moment is a contraction of credit, which is an effect of deflation.

Headlines and economist are saying that we've hit bottom and the worst is over. Contrarians say 'don't believe it.'

Inflation or Deflation? Which will win?

From an Elliott Wave Principle perspective, deflation will win and the worst is not over yet. The U.S. economy is starting on its second dive into a deflationary spiral, towards what could be labeled as a new great (global) depression.

When we imagine the cycle of credit contraction just described continuing at an accelerated rate, on a wider scale, and penetrating deeper into our daily lives, at work and home, then it is easy to see Robert Prechter's forecasts, in his October 2003 Elliott Wave Theorist newsletter, coming true:

- The total amount of credit outstanding worldwide will decline substantially.

- Consumer confidence will fall to record low levels.

- The trend toward economic contraction that began in 2001 will continue to develop into a depression.

- Real estate values will fall more than they did in the 1930s and 1940s.

- More banks will fail than failed in the 1930s.

- The unemployment rate in the U.S. and in most countries around the world will rise and eventually exceed 25 percent.

- Affordable housing will become difficult to come by. Family members will move in with each other. Homelessness will increase.

- Stock markets around the world will continue to fall. Ultimately, the averages will drop more than 90 percent.

- Debt packages made of mortgage-backed bonds, auto loans and credit card debt will become viewed as unworthy investments.

- Many, if not most, pension plans will fall in value and be unable to provide the promised benefits. Anger over this development will result in demonstrations, violence and tardy and ineffective political reform.

- The Federal Reserve System will be discredited and then abolished.

Understanding is your first step. If you haven't yet given Prechter's deflation argument your full attention, you should know now that yesterday was the best time to do so. Steadfastly throughout the years, financial analyst Robert Prechter issued warning after warning about the coming deflation. The experts said he was wrong. The markets proved otherwise.

Download Your 60-Page Guide to Understanding Deflation – FREE!

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95 Bank Failures In 2009. Will Yours Be Next? Conquer the Crash Has The Answer

According to the Federal Deposit Insurance Corp. Atlanta's Georgian Bank is the 95th bank to fail in 2009 and the eighth biggest failure this year.

To give you an idea of the scope of the current deflation hammering banks here is a list of bank failures since 2000:

2009 - 95 bank failures
2008 - 26
2007 - 3
2006 - 0
2005 - 0
2004 - 4
2003 - 2
2002 - 11
2001 - 04
2000 - 02

The total bank failures for 2008 + 2009 is 121!! From 2000 to 2007 there were only 26 banks that failed.

Wow!

The cost of Georgian Bank's failure to FDIC's deposit-insurance fund is $892 million, whose balance has hit a 17-year low of $10 billion as of this summer. Given that there is more deflation to come the FDIC will find it necessary to go to the U.S. Treasury and borrow from its $500 billion credit line. The question is will that be enough?

That's why we recommend you get Conquer the Crash, by Robert Prechter, because it comes with a "vital supplement to its still-prescient original content." Included with each book is a brand new CD-ROM addition that has lists for:

- The Two Highest-Rated Banks in each of the 50 U.S. states
- The Highest-Rated Large Banks in America
- The Largest Treasury-Only Money Market Funds
- The Highest-Rated U.S. Insurers

Back in 1802 Thomas Jefferson said 'I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered.' Certainly very topical for what's happening today.

So if you want to find out whether your bank is next on the 'failure' list order your copy today!

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A Deflation Economy and How it Affects You

A deflationary economy is one in which values of goods and services fall. With falling prices, on everything from stocks and property to food and clothes, the value of money necessarily rises. But there is less of it to go around as the amount of credit available shrinks.

The effects of a deflationary economy will be different for people in different positions.

If you are on a fixed income the purchasing power of your income will rise. You will have more left over after purchasing necessities than before. That is, as long as your income continues. If the bank or financial institution which pays your fixed income can continue to do so, that's fine. But in a deflationary depression many banks and financial institutions will fail.

Savers will be rewarded with increased purchasing power of their cash. The most prudent thing would be to purchase large items, like property, at cheap prices they can easily afford.

Debtors will find that they have more money left to pay debts during deflation, as the cost of everything else they purchase falls. As interest rates are also falling due to deflation, the dollar amount payable also falls. However, this only continues to be an advantage as long as their income does not fall. As deflation usually goes hand in hand with rising unemployment, this is often not the case. Then debtors find that the dollar value of their debt is actually increasing, just as the value of a dollar increases in deflation.

Owners of assets can see huge falls, and already have, when the value of their assets, such as their homes, falls sharply. If they are asset rich and cash poor and need to raise cash they may find themselves in the unlucky position of having to sell in a deflationary market. The same is true of any investment such as stocks and bonds.

Deflation in an economy also affects psychology. When people see prices falling, they hold off purchasing because they figure they can get it cheaper if they wait. They expect the situation will continue. So the psychology of a population goes from one of easy credit and spending, to one of saving.

This psychological situation will be the reverse of the mania experienced in the early 2000's. Remember when everyone was encouraged to 'get on the property ladder'? The mantra was, prices are rising and always have, if you don't buy now it will surely be more expensive later. No one believed prices could move in the opposite direction. At the peak of the mania it was assumed that those who did not buy were fools, especially if they considered that prices might stop rising.

When prices are falling, everyone will expect them to continue to fall. People will be discouraged from buying assets such as property as everyone around them will be insisting they wait to get it cheaper later, and that only fools would buy now.

This group psychology is important as it affects major financial decisions. If you follow the herd you will buy at the peak, and sell at the trough. The good news is that there exists a rational analytical method that has a forecasting history, which you can use to avoid this common pitfall. The Elliott Wave Principle understands that psychology drives markets, not the other way around. The proof of the superior accuracy of this principle is Robert Prechter's Conquer the Crash. Written in 2002, it predicted the 'credit crunch' causes and effects with unnerving accuracy. However, according to this book the worst is yet to come. If you want to be prepared for the coming deflationary depression, you need to read this book.

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Deflation Inflation

To answer the question of whether we will have inflation or deflation in the upcoming years, we need to have an understanding of what these terms mean, and also what money is.

Money today is debt. Or, debt is money. The expansion of money in our economy is not by the increase of productivity, it is by the increase of debt. The expansion of money/debt has been increasing exponentially because of the application of the banks use of the fractional reserve 9:1 ratio. If you are not familiar with these ideas, we highly recommend you watch Paul Grignon's 47 minute animated presentation, 'Money as Debt', on YouTube.

One very simple way to explain the credit crunch would be to consider that the amount of interest payable on the debt owed became a figure higher than the population could earn. Hence defaults and the beginning of the sub-prime crisis and the toxic assets held by the banks. Why are they termed toxic? Because the original people who were debtors to the loans cannot pay them.

This explanation fits nicely with the Elliott Wave Principle. The last stages of the inflating debt bubble were driven by group psychology. Debt became easier to obtain- buy that house, stocks, TV now, no down payment, interest free for 18 months, being offered to practically everyone.

The expansion of money/debt is inflationary. As the amount of money circulating in a system increases, the perceived value of each note decreases. Just as if you were to add water to an alcoholic drink, it becomes less concentrated with alcohol, there is less value in money when it is diluted. So it takes more of it to buy the same stuff.

The opposite of this situation is what we have begun to see, and will see in a more extreme fashion in coming years. Fear has set in at the top of an inflationary cycle and more people will continue to default on their debts. Therefore, the willingness of banks to extend credit reduces. And because money is debt, with reducing credit we reduce the money supply. When there is less money being supplied we have deflation, which is the reducing value of stuff (very simply put).

Further examples of deflation: the stock market, from a high of 14,157 on October 2007, the DJIA fell to a low of 6,715 in March 2009; property markets around the world have plunged; oil has fallen from a high of $137.11 per barrel in July 2008, to a low of $34.57 in January 2009. Many consumer goods have become cheaper and the CPI of many countries is showing negative figures for the first time since the Great Depression.

Since these lows many markets have risen, but this is a bear market rally. Deflation will return because the underlying fear and pessimism is still there.

Because most of us have not experienced deflation in our lifetimes, we need to be prepared. If you are wondering how to protect your family and your wealth from deflation, you would be well advised to read Robert Prechter's Conquer the Crash, where he outlines very clearly what deflation is, how it affects you, and what you can do to not only avoid its negative consequences but also to prosper.

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The Deflation Effects on the U.S. and Global Economy

The 'ghost fleet' near Singapore. No crew, no cargo and no destination.

Here at The Deflation Times our purpose is to inform the public that being ready is the best antidote to a depressionary deflation which is riding in on a continued contracting economy.

The contracting economy is the most visible change in the current transformation of social mood (from spending to saving... from inflation to deflation) and fiscal conservatism is driving it.

Take for instance bottled water. Budget-conscious consumers are now asking why pay for bottled water when tap water is (practically) free?

Another example is the richest universities in the country, which are not immune to the contracting economy. Harvard's Endowment has dropped sharply, by nearly 30 percent, and we add so has Columbia's Investment Fund, by 16.1 percent, and Yale University's endowment fund, which shrank a more-than-expected 30 percent.

As Bloomberg has reported, economists are now nearly unanimous that the 'recession' is over. But exports and imports, a critically important part of the U.S. economy, continue to lag. Clearly, there is no sign of a rising demand for shipping services as reflected in the Baltic Dry index of freight rates, which is down 10% since August. As the picture at the head of this article shows, "the biggest and most secretive gathering of ships in maritime history lies at anchor east of Singapore. Never before photographed, it is bigger than the U.S. and British navies combined but has no crew, no cargo and no destination - and is why your Christmas stocking may be on the light side this year."

The bad-news bears continue with new unemployment data that shows, even if the economic recovery is around the corner, that it will take many years for labor market to recover.

But fiscal conservatism will continue, to the point where Federal Reserve Chairman Ben Bernanke's claim that "the worst recession since the 1930s is probably over" will come back to bite him.

And continued policies such as financial institutions (backed by The Federal Reserve) snapping up securities backed by Ginnie Mae are like putting out the fire with gasoline. Will banks ever learn?

So what if the economy will not recover?

We do not think that an economic recovery is around the corner.

Our view comes from subscribing to the Elliott Wave's Theorist and Elliott Wave Financial Forecast, which predict that we're in for another wave of a deeper economic contraction, at a much larger scale than what we have recently experienced.

So what to do? Take the antidote and download the FREE The Deflation Survival Guide.

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Homeless in America: Tom Stone Photography

One of many images from Tom Stone's photographs of American Poverty, a display of people who are "...poor and destitute on the streets; homeless or in shelters or drifting or on government assistance or such..."

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How to Get Robert Prechter’s Conquer the Crash Free!

Are you looking for a way to get the book Conquer the Crash for free?

Well, you can. When you subscribe to the Elliott Wave Financial Forecast service, which delivers the most insightful market analysis you can buy, you will get your very own free copy of Conquer the Crash delivered right to your front door.

So what do you get with your subscription to the Financial Forecast service?

The Financial Forecast Service Includes the Short Term Update, published three times a week (Mon, Wed, Fri), plus the Elliott Wave Financial Forecast, published monthly, and the The Elliott Wave Theorist, also published monthly.

The Short Term Update provides forecasts for the markets' turns (after the markets close) and includes extensive Elliott wave charts and commentary on the Dow Jones Index, S&P Index, U.S. Bonds, the U.S. dollar, the Euro, Gold, and Silver. It also includes occasional special opportunities for stocks that look poised for major moves.

The Elliott Wave Financial Forecast tracks intermediate-term patterns in the U.S. markets and forecasts upcoming price movements. You will get monthly wave analysis of stocks, bonds, metals, the U.S. dollar and economic and social trends. This is an award-winning newsletter and it was named #1 Bond Timer and Featured Advisor by Timer Digest.

In the Elliott Wave Theorist you’ll get Bob Prechter’s cutting edge view into when, where, and why the waves are unfolding in the broader market. Each Theorist provides unparalleled insight into the sociological and psychological signals in the marketplace.

By starting your Financial Forecast Service subscription today you will be two steps ahead.

Bob Prechter, Steve Hochberg, and Pete Kendall don't take their lead from Federal Reserve policy, news headlines, political elections or People magazine covers. They forecast the trends that produce those outcomes so you can expect them to happen.

The analysis in these publications go beyond the financial markets. There are hundreds of places to get investment ideas. But which of them gives you the striking political, social and cultural commentary you find every month in The Elliott Wave Theorist? Or when crude oil hit all-time highs in August 2005, the Short Term Update was virtually alone in saying that prices should soon plummet. By themselves, such observations are worth the price of the subscription.

You will also receive special reports and interim reports. Your subscription includes more than a monthly newsletter. Bob and his research staff produce interim reports at critical junctures in the market, when you need them the most. They'll even send you these reports overnight, if the information is extremely time sensitive. Special reports are released for a strategic view of an important issue.

There is no question that you need to make objective investment decisions during tumultuous, emotional times. Bad news has become the world's fastest moving commodity. Don't be confused when it comes. When you subscribe to the Financial Forecast Service you will receive a) reliable information, b) a proven investment method, c) the best protective strategies, and d) the best investment opportunities.

Plus, your free copy of the best selling Conquer the Crash book.

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Who should read The Elliott Wave Theorist Newsletter?

The short answer is everybody. Investors, teachers, community leaders, business owners, corporate CEOs, your mom and dad... Anyone who reads it will find Robert Prechter's Elliott Wave Theorist (EWT) newsletter a life-changing experience.

What is it about? The Elliott Wave Theorist is about the Elliott Wave Principle and how it is applied to the economy, financial markets, nature, socionomics and our lives. The unparalleled insights gained from reading to the EWT newsletter are not available anywhere else because its content is unique.

The Elliott Wave Theorist presents though-provoking evidence of how Elliott Waves depict optimistic social mood, in which an expanding confidence in present conditions is expressed, and as the mood turns, social mood changes to pessimism, to the point where there is a contraction in confidence and its expression.

The primary focus of EWT is to track "intermediate-term patterns in the U.S. markets and forecasts upcoming price movements... in stocks, bonds, metals, the U.S. dollar..." But don't let the financial focus deter you because it also integrates the economic and social trends affecting our culture at large, at the macro level, and you and me, at the micro level. It also includes commentary on behavioral finance, physics, pattern recognition, and socionomics.

Ahead of the twists and turns that affect all of us, from what's unfolding in the U.S. financial markets to what's happening at your very own bank, this revealing newsletter is the best financial and social forecasting publication anywhere. Its content is astute and the relevance universal.

The forecasts in EWT may be of the reversal in a decade long trend of oil or about social change in politics, such as when a president is more likely to be elected for a second term. It also provides detailed technical analysis of specific Elliott Wave patterns found in charts from the Dow Jones to General Motors' stock.

To give you an idea of its forecasting success, while being hated by many bull investors because of its irritating pessimism throughout the late, lamented bull market, the newsletter, was one of the very few to make a forecast of the crash of 2008. Additionally, reading through EWT newsletters from 2003 to 2007 there are many instances that forecast what's has happened and what's exactly happening right now. In other words, Robert Prechter was not only fully aware of what was just around the corner but was also one of only a few forecasters to call the crash.

Think of reading EWT as reading tomorrow's news today. The newsletter is published at least 12 times a year and it is worth every penny. Published by Elliott Wave International, the first issue of the Theorist was published in April 1976 and has been continuously in print since May 1979. Robert Prechter is the publication's editor and main contributor.

The latest Elliott Wave Theorist issue (August 2008) challenges current recovery hype with hard facts and the main point is that the worst is NOT over. But more important, there is advice on what you can do to safeguard your financial future.

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Elliott Wave Theorist, Who Needs It?

Contrary to Elliott Wave Theorist, most economists are predicting inflation ahead, rather than deflation. Every now and then an economist might admit deflation is possible, but will counter this with the argument that inflation will eventually reign. One of their arguments seems to be that the economic recovery has begun, and this will prevent the development of a deflationary spiral. But, are you willing to bet on the economists saying the recession is over?

Why can economists not entertain the concept of deflation? Partly, the answer is that they are so used to inflation being the norm, it has been the norm all of their lives, that they cannot comprehend such a massive shift. But just because we have not had a deflationary depression since the 1930's does not mean it cannot happen again.

Will we have deflation or inflation?

Despite a bear market rally we still have deflation. It's been happening in Japan for some time, now it's happening in Europe, in Britain, and in some states such as California. As the bear market returns in full force we will see deflation take a stronger hold. Credit expansion will slow further as banks become more wary of making loans, households will become more wary of spending as unemployment rises, retailers will be chasing fewer dollars and prices will fall. Stocks, commodities and property prices will all tumble again, to new lows. The funds to buy these will simply dry up as the full force of the collapsing credit bubble plays out globally.

Protecting your wealth in a deflationary scenario is very different to how it is done during times of inflation. Your approach should be very different, and this is why you need to be sure that you have the right prediction. Robert Prechter, using the Elliott Wave Principle, has been accurate in his predictions to date, and he is predicting deflation not inflation.

You will need specific information depending upon where your money is held. As the second wave of the credit crunch unfolds you will want to be able to pick winners before the race has run. You will want to know if gold really is a good place to put your money, or not. As times get tougher and deflation bites hardest you will need to know which are the safest banks, least likely to fail and most likely to return your money when you want it.

The Elliott Wave Theorist is for those who realise that Wall St has got it wrong. That very few mainstream economists predicted the credit crunch and resulting economic chaos. That of the few who did see what was coming, Prechter and Elliott Wave were among the most specific and accurate.

If you have wealth to protect you need regular updated information from people who clearly know what they're talking about. You need clear specific advice on how to avoid your assets value disappearing when deflation takes hold.

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Waves of Euphoria and The Elliott Wave 2 Trap: Watch Out!

The waves of euphoria that engulf Wall Street and the $2 Billion 'clunker' program, where you can get $4,500 for the purchase of a new car when turning in an older vehicle to be scrapped, will not stop the second flood of deflation that is still yet to come.

Contrary to the latest "all is getting better" headlines, the bear market is not over and the boom is not back.

Newton should have known better back when the South Sea bubble burst, back in 1720, after he lost a lot of money. This time around, the credit bubble has more bursting to do. Even with Wall Street buoyed up by the GDP report we see consumers still aren't spending. And until they do, everyone has to be wary of any recovery talk.

The main theme of desperate times calling for desperate measures, like Arizona state possibly selling its Capitol buildings, may have had a bit of respite but it'll be back, greater and harsher than ever.

Ouch!

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Bubble of Optimism to Pop

See Cartoons by Cartoon by Mike Keefe - Courtesy of Politicalcartoons.com - Email this Cartoon

The bubble of optimism from the top (US economy saved from 'catastrophe') will soon pop.

Employment numbers may support such 'saved the day' claim but even if businesses are now hiring it is likely to be just about everywhere you don't want to work.

A bigger contraction is on its way which will make it difficult, if not impossible, for continued optimism and programs, such as an overhaul of health care, will not see the light of day.

Although the headlines appear rosier in America they are a bit different for Japan and England. Japan's eternal downturn is now entering a deflation period, according to the Bank of Japan.

Plus Mervyn King, the Bank of England Governor, also warns 'deflation remains a very clear and present risk'. Yes, indeed. But will the continued quantitative easing to fend off deflation work? We don't think it will.

The big global deflation turn is nigh and when it arrives there will be a loud pop.

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Aging Storm on the Horizon

In the October 2003 Elliott Wave Theorist ( page 8 ) there is the forecast that by the time this economic collapse is over "Social Security in its current form will fail."

Today, it is no secret that the population of the United States is aging and as more people over the age of 65 retire the strain on Social Security to pay benefits will continue to increase.

The question is, will it get to the point where it may not be able to pay any benefits at all?

Well, the Congressional Budget Office has updated its Social Security projections, for both outlays and revenue, and their chart (shown below) shows that Social Security is about to go negative real soon:

Because the ratio of workers to dependents is declining and the economic situation will continue to deteriorate, which equates to tax receipts declining as well, Social Security in its current form has to change or it will fail.

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Home Values? Perception vs Reality

A quick look at the real estate crash numbers and it is hard to believe that home values can go lower.

If over the past year "83% of U.S. homes declined in value" then there is only 17 more points left to go to reach the mark of '100% of U.S. homes declined in value.' A chart from Zillow’s Q2 Real Estate Market Reports paints the current picture:

Can home values continue to fall?

The perception is that in the next six months home values will not continue to decline, as shown in Zillow's Home Value Misconception Index chart:

The reality is that home values will continue their decent down the deflation path as fiscal conservatism continues to penetrate all aspects of American society. And with more bad news coming down the pipeline, such as the next scandal, that of Fannie Mae's "$5.4 trillion in taxpayer liabilities" that remain off-balance-sheet, just like Enron and Citigroup had done before, the perception that the decline of home values will stop will be shattered.

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