Deflation everywhere...

 Falling oil prices are only one deflationary force in the world today...

In yesterday's Digest, we discussed OPEC's recent decision to maintain current levels of oil production... And the havoc it wreaked on oil prices.

Even before oil's 40% plunge since June, there were plenty of deflationary threats lurking in the global economy – despite central banks' best efforts to thwart them.

 Japanese Prime Minister Shinzo Abe declared war on deflation, vowing to do whatever necessary to break Japan's 15-year deflation. (Steve Sjuggerud dubbed this "Abe's Revenge.")

The Bank of Japan surprised markets with the announcement of further easing on October 31. Abe has a 2% inflation goal for Japan. But the Japanese Consumer Price Index (CPI), an inflation measure, shrunk 0.9% in October.

 We're seeing the same thing in Europe.

Yields on Germany government bonds ("bunds") – the European sovereign benchmark – have fallen into negative territory... meaning you pay the government for the safety of holding its bonds. Elsewhere, like Spain and Italy, yields are egregiously low, especially considering the fiscal messes these countries are in.

European Central Bank head Mario Draghi announced he stands ready to buy sovereign debt to boost European inflation. Inflation in the European currency union was a meager 0.3% in November (well short of its 2% goal).

 And while the Federal Reserve has ended quantitative easing (QE), it's still not seeing satisfactory inflation.

 Lower oil prices only amplify the issues.

Sustained low oil prices could trigger a crisis event – a huge deflationary pressure. As we noted yesterday, Venezuela could default on its debt, which would cause a wave of panic selling.

Low oil prices are also killing Russia, which is still in the middle of its conflict with Ukraine and dealing with economic sanctions from the U.S. Money is fleeing Russia thanks to the geopolitical problems. And the ruble – the country's currency – is collapsing. The chart below show this collapse... but as an uptrend. The chart displays the dollar-to-ruble ratio. A soaring ratio means the dollar is rapidly gaining value against the ruble. The number of rubles a dollar buys has skyrocketed from 36 to 54. It's an extraordinary short-term collapse in value for a currency.

 Now the energy companies – which drive Russia's economy – are getting squeezed. And when they turn to the government for help, the money may not be there. The future largely depends on how Russian President Vladimir Putin decides to respond.

All of this, according to former PIMCO CEO Mohamed El-Erian (who currently serves as Chief Economic Advisor for insurance giant Allianz), could push Europe into a recession. As he wrote in a recent Bloomberg column...

Should Putin take the second course [of increasing Russia's Ukrainian presence], the West may impose more economic sanctions, including on the energy and financial sectors, and Russia would probably follow with counter-sanctions on energy supplies to Europe. This could push Europe into recession – which would negate much of the good impact that lower oil prices have had on the global economy.

 These deflationary threats are being reflected in U.S. Treasury yields. Take a look at this chart of the 10-year Treasury bond yield...

 As Steve Sjuggerud discussed in today's DailyWealth, there's a good chance that 10-year yields could fall further from here.

Steve's reasoning is based on the relative value of 10-year bonds compared with other sovereign yields. He shared the recent opinion of Jeffrey Gundlach, founder of DoubleLine Capital... who Forbes recently nicknamed "The New Bond King." From today's DailyWealth...

Gundlach pointed out that interest rates on government bonds in Italy and Spain are around 2%, and interest rates in France are around 1%. Which would you rather accept: a) 1.8% interest from the Spanish government, or... b) 2.2% interest from the U.S. government Gundlach would take the U.S. government bonds – he sees U.S. government bonds as a better relative value. It's not just government bonds... Gundlach says that, compared to U.S. corporate bonds and U.S. municipal bonds, U.S. government bonds are still "cheap."

 Steve has been warning for years that interest rates could stay depressed, and even head lower. In the January 12, 2012 DailyWealth, he explained why, using Japan as an example...

In short, it is definitely a zero-percent world today. The question is, how long can it last? The answer is... a very long time. I pushed Japan's interest rates forward by a decade, to compare its path with ours. Japan faced its "lost decade" one decade before we did. And its government attacked the problem the same way our government has in the United States, with dramatically lower interest rates and dramatically increased government spending. Twenty years later, Japan's economy is still not growing. It still has extremely low interest rates. And thanks to all the government spending, Japan now has the world's highest ratio of government debt-to-GDP. (Ominously, Japanese real estate has not started a recovery, either.)

 In short, interest rates could go lower from here... And they could stay at depressed levels for a long time. So it's important to know how to profit in a low-interest-rate world (more on that in a moment).

Of course, the Federal Reserve could always raise interest rates. However, given the global economic condition, it's unlikely they'll raise rates any time soon.

 Currency expert and friend of Stansberry Research Jim Rickards explained why he thinks the Fed will keep rates low at our recent Alliance Conference in the Dominican Republic. Steve summarized Jim's presentation in the November issue of True Wealth...

Jim says it's likely the Federal Reserve will NOT raise interest rates next year. "Prove it!" I thought to myself, as he spoke. And he did... Jim explained that it all comes down to who makes the decisions to raise interest rates... And Jim says the interest-rate voting committee in 2015 will be made up of "doves" – those who aren't in a hurry to raise interest rates. "Almost everything changes on January 1," he said. "The president has vacancies to fill among Fed Governors, and he will most certainly put doves in." Jim also says two "super-hawk" Fed governors – Richard Fisher and Charles Plosser – will no longer have a vote. (These super-hawks are more likely to raise interest rates.) In short, the Fed's voting members change yearly, so Fisher's and Plosser's time is up. Finally, Rickards says that Janet Yellen – the head of the Federal Reserve – is also dovish and won't be in any hurry to raise interest rates. So the list of voting members in 2015 will be loaded with doves who won't raise interest rates.

 Still, deflation is a temporary phenomenon. Eventually, central banks – which have the power (and will) to print unlimited amounts of money – will win. You can't bet against the printing press over the long term.

The argument of deflation versus inflation is one of the most important issues in the world today. And if you want to prosper in the coming years, you must have a good grasp of the problem.

 Luckily, Jim Rickards wrote the single-best book explaining what's happening in the global economy today, titled The Death of Money. In it, he explains the battle between deflation and inflation... and why he – like us – believes inflation will win in the end.

 Jim also agreed to write an exclusive bonus chapter just for Stansberry Research readers. In addition to his brilliant insights from the book, you'll also learn exactly what to buy to profit from the current economic condition.

We think this book is so important, we're giving it to you absolutely free of charge. We just ask that you pay less than $5 to cover the shipping and handling costs. Claim your free copy right here.

 New 52-week highs (as of 12/1/14): Automatic Data Processing (ADP), Amgen (AMGN), Chubb (CB), WisdomTree Japan Hedged Equity Fund (DXJ), Express Scripts (ESRX), Eli Lilly (LLY), and Altria (MO).

 In today's mailbag, a subscriber questions our rare-coin experts. Have you dealt with Van Simmons or Rich Checkan? Let us know about your experiences at feedback@stansberryresearch.com.

 "I find it interesting that you still continue to present Van Simmons at David Hall Rare Coins and Rich Checkan at Asset Strategies International as sources for gold. Unless I'm mistaken, they are in the business of buying and selling coins, and a good percentage of the price we pay for those coins is attributable to the 'collectability' and 'desirability' of the coins.

"In my mind, the value of these coins is made up of two components; the raw value of the metal which is a concrete value that you can actually touch, and the perceived additional value of the beauty, rarity, etc of the coin, a purely non-concrete value that you cannot hold in your hand. When fiat currency finally falls off the cliff, no one will have the discretionary funds to afford gold coins with a large percent of their value as something other than what you can hold in your hand.

"In that instance, the value of collector coins is likely to drop to a value more nearly equal to just the raw value of the metal itself. Thus, I prefer physical, where I am paying for the gold at its market price plus a reasonable premium as profit for the purveyor. My gains or losses are tied strictly to the market value of the precious metal, not some whim of public desire. Just my humble opinion, take it or leave it." – Paid-up subscriber David Paul

Goldsmith comment: Thanks for writing in, David. You're talking about numismatic coins, which are collectibles. As you suggest, those are priced differently from bullion coins (which we'll discuss in a moment).

To be clear, these are two completely different markets. You can think of rare coins as you would think of art. Bullion coins are cash.

When a crisis hits, people all over the world look to buy rare, high-quality assets with value... whether that's a Picasso painting, a rare Rolex watch, or a desirable coin.

Traditionally, the highest-end collectibles move higher. We've seen records broken across the board in the categories we just mentioned.

The middle-of-the-road collectibles – the ones the Average Joe can afford – won't likely appreciate much during a crisis. But the best collectible coins will soar in value.

So to say a rare collectible coin will revert to its melt value during crisis is like saying a Picasso will revert to the intrinsic value of the canvas and paint.

Van Simmons at David Hall Rare Coins and Rich Checkan at Asset Strategies International are both large dealers of collectible coins as well as bullion coins. Bullion coins – like Krugerrands and gold eagles – trade at small premiums to the spot price of gold... and should be viewed as a currency.

There are merits to owning both assets. We'll leave the decision up to you. But if you're interested in purchasing either type of coin, you can reach Van at 1-800-759-7575 or by e-mail at van@davidhall.com. And you can reach Rich at 1-800-831-0007 or by e-mail at contactus@assetstrategies.com.

Regards,

Sean Goldsmith

December 2, 2014