In mid-2007 Lombardi's Profit Confidential predicted the United States would be in a recession in the first or second quarter of 2008. Now, the popular stock market e-letter warns it will be a "deflationary" recession that will go on longer than most analysts and economists expect.

In his report, Michael Lombardi states, "House prices are falling. Stock prices are falling. Car prices are falling. And prices for most merchandise (especially electronics) are falling thanks to the continuing glut of cheap imports from China. The real risk in today's economy is not recession (even though we are going to get one). The real economic risk today is the dreaded opposite of inflation: Deflation."

Lombardi continues in Profit Confidential, "Deflation is the single largest threat to the American economic machine. I also believe home prices, stock prices, car prices and general merchandise prices will continue to fall over the next 12-24 months setting the stage for deflationary times in the U.S. Of all three states of price movement (deflation, inflation and stagflation), deflation presents the greatest risk as deflationary periods prolong economic recessions."

According to the article that appeared in Profit Confidential today, Lombardi sees two insurmountable problems facing America today that would result in any deflationary period being extremely difficult for the economy to steer away from. Lombardi reports, "… unlike Japan consumers during their deflationary years, American consumers do not have savings to spend their way out of a recession. As we know, the savings rate in the U.S. is near a record low. Secondly, the falling U.S. dollar makes a free-fall in U.S. domestic interest rates almost impossible. The world, which once ran to American dollars, is now running away from what became the world's reserve currency. You can see this in the action of gold bullion prices."

Lombardi's Profit Confidential believes the U.S. Federal Reserve will lower rates aggressively next week and in other Fed meetings as the year progresses. But warns it would be very difficult for the U.S. to bring interest rates down to 1% and hope foreign investors would remain attracted to U.S. government bonds that we need to desperately sell to finance our deficit."

For the full report, please visit: http://www.profitconfidential.com

Profit Confidential is Lombardi Financial's free daily investment e-letter. Written by financial gurus with over 100 years of investing experience, Profit Confidential analyzes and comments on the actions of the stock market, precious metals, interest rates, real estate, other investments and the economy. Lombardi Financial is a division of Lombardi Publishing Corporation, founded in 1986, now with over one-quarter million customers in 141 countries. For more information, and to get the popular Profit Confidential e-letter sent you daily, visit: http://www.profitconfidential.com