Every few years an economic event will happen that can be easily seen by everyone except mainstream economists. Today that economic event is a global tidalwave of deflation that is sweeping the globe.

The other day India says it is facing wholesale deflation. India! Of all places.
China producer price index has fallen for three straight years, while their consumer inflation has almost flattened and wages are falling.

These emerging market BRIC countries are exporting deflation to 1st world nations (despite denials) where the most brutal effects are being felt.
While Japan is slipping back into deflation, Europe is in outright deflation.

"Just as a bad cold leads to pneumonia, so over-indebtedness leads to deflation."
- economist Irving Fisher, 1933

Deflation isn't a real problem unless you have a lot of debt. In a deflationary environment the debt burden actually increases even if interest rates are at zero. It just so happens that the world is saturated in debt.
Speaking of interest rates, we are seeing things that have literally never been seen before in all of this planet's history.
For instance, Germany recently sold five year bonds with negative interest rates. Finland already accomplished that feat.
That means that investors are loaning money to Germany with the understanding that in five years they will be paid back less.
Right now, 16% of global outstanding government debt is trading with negative interest rates. That's more than $2 Trillion in bonds.

It isn't just sovereign bonds. Nestle SA was able to sell bonds with negative interest rates. Roche Holding AG has also managed this feat.

It's not like the people buying these bonds are idiots. The buyers of these bonds are professionals who are purchasing them in multimillion dollar chunks.
So if they are not stupid, then the purchases only make sense if a) there is significant deflation that will happen over a period of time of at least five years, or b) all the central bank intervention has distorted asset prices to the point that it no longer reflects reality, or c) a combination of a and b.

If this sounds like Bizarro World, that's because it is. Economists have long considered negative interest rates to be impossible.
The economy has gone completely off the rails.
I want you to believe me when I tell you that we've literally never been here before. To make sure you understand, check out this 200-500 year chart.

As everyone can see, Europe is in totally uncharted waters. Interest rates have detached from reality.
But here's the real kicker - it isn't just Europe. It's the entire 1st world, including the United States.

Judging by the recent economic news, the deflationary pressure is building in the the United States.
Year-over-Year Producer Price Index Final Demand has fallen (-0.6%) for the first time on record. Retail sales declined for the third month in a row. Import prices plunged 9.4%.
In fact recent American economic reports have missed expectations by the widest margin of any 1st world nation.

Economists are at a complete loss as to why the American consumer isn't spending, which only proves that economists are clueless.
The reason is obvious, and that reason is wages.

Wages have become even more critical as households, still shaken after being caught with too much debt when the recession hit, remain unwilling or unable to tap home equity or let credit-card balances balloon to buy that new television or dishwasher. By not overextending themselves again, Americans are only spending as much as their incomes will allow, meaning that 70 percent of the economy is riding on how fast pay rises.

Consumers are saturated in debt already, so more borrowing isn't in the cards. And since literally all the wage growth of this recovery has gone to the top 10%, the class least likely to spend, the economy is recovering at a snail's pace.