A. Gary Shilling is so confident of his forecast for eventual price deflation in the U.S. economy that he has set it to music for the holidays.

Instead of the traditional lyrics for "The 12 Days of Christmas," Mr. Shilling, a former Merrill Lynch chief economist, recently offered clients "The 12 Steps to Deflation" listing reasons for the reversal of a 50-year trend to higher prices.

Twelve steps to deflation

Are currently in place:

Defense spending dropping;

Deficits a'shrinking;

G-7 folks retiring;

Technology expanding;

Restructuring abounding;

More global sourcing;

Global glut increasing;

Internet everywhere;

Mass distribution;


More market systems;

And the dollar's king of currencies.

With these 12 elements in place, Mr. Shilling says, a downturn in consumer spending is all that is needed to trigger deflation.

Mr. Shilling, who is president of his own consulting and money management firm, A. Gary Shilling & Co. in Springfield, N.J., promises more details in a book due in February.

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