The Disappointment Index.

Bet you did not know that there was such a thing, did you? Well, there is. Except, it is called the U.S. Economic Surprise Index. Here it is:

What does it mean exactly?

The article referenced a Bloomberg Index such:"The Bloomberg ECO U.S. Surprise Index, which measures whether data beat or miss forecasts, fell to the lowest since 2009, when the nation was in the deepest recession since the Great Depression." So, the economic data have been underwhelming.

Why is that?

Larry Edelson defines the problem as "deflation."

And why do we have deflation?

His answer is too much debt and investors moving into the "risk off" mode. Here is how he puts it:

"
a matter of fact, according to a recent study, global debt has increased a whopping $57 trillion since 2007 which has outpaced the global growth in gross domestic product.   So debt to GDP ratios as a whole in terms of the global economy have actually gotten much, much worse since the real estate crisis of 2007/2009.   Debt has gone up $57 trillion while GDP in most cases is stagnant and in the case of Europe has actually declined. 

As part of that, household debt has increased only roughly 2.8% while corporate debt has increased about 5.9%.   Household debt increase of 2.8% since 2007 is really very modest so that is telling you that the households are really contracting their debt, certainly not taking on much more new debt.   Corporate debt has increased 5.9%, greater than the global growth in GDP, something to be concerned about, no doubt. 

But the key here is the red sentence at the bottom.   Government debt on a global basis has increased a whopping 9.3% since 2007, an extraordinary amount.   Why?  

Well, it is simple.   Governments around the world, despite their talk about austerity amongst their own public sector, amongst the government, is a bunch of BS.   Governments are still spending money dramatically, way more so than the growth in global GDP.   So this is leading to a very tenuous situation and investors recognize it.   There is too much debt in the world so they are pretty much in a risk-off mentality, waiting for the next shoe to drop and that by its nature is deflationary." Larry then shows the Commodity Indexes dropping as deflation devastates prices.  

What might fix the situation is a strategy used by Ronald Reagan: one that employed tax cuts and optimism.