Deflation is now accepted as the biggest threat to Western economies, especially hugely indebted nations, like the U.S. and Britain.

Inflation, which was recently the major enemy, has swiftly retreated, as widely predicted.

Many experts are belatedly waking up to the gravity of the situation. In the UK, former Chancellor of the Exchequer, Ken Clarke, has dismissed comparisons with the 1970s, ’80s and ’90s, likening current conditions explicitly with 1929/30.

Normally cautious Bank of England Governor, Mervyn King, forecasts a 2 percent contraction in the British economy next year, with interest rates falling rapidly to nought percent for the first time in history.

Deflation is now the enemy we must all factor in to our expectations in the near-to-medium terms, even in the dependably buoyant American economy. The Japanese “lost decade” of the 1990s may be set to play out across the world.

Why then is deflation necessarily worse than inflation?

In an era of massive indebtedness, both private and public, deflation increases the burden. As incomes decline, debts remain the same — at levels signed for in better times. It’s the exact opposite of the apparent wealth created during periods of rapidly rising house prices.

Professor Peter Spencer of York University says, “It is going to be absolute murder in Britain if inflation turns negative. The big difference with past episodes is that we are now much more heavily indebted. Few people owned their own houses in 1930s. Debts were miniscule.”

Another symptom of deflation is that consumers wait for lower prices before shopping, causing job-losses in Main Street and yet more bad economic news.

So what can be done either to pre-empt or cure the curse of falling prices across the board?

Curiously, Keynesianism which, in its misunderstood version is disastrous in normal times, does hold out some hope in depressive conditions. Expect central banks to start printing money soon and dropping it from helicopters, if they haven’t started already. Want to buy some rising stock? Buy helicopter shares. [This is not financial advice.]

If you’re one of those noble souls who saved assiduously during the asset bubbles, you will just have to stand by and watch the profligate oafs who caused the problem clean up, while your own responsible hoard of value drains away.

It’s just not fair, but it will probably have to happen “for the greater good”.

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Many investors are now looking for reliable stores of value for preserving their cash.

Gold is now touching $1000 an ounce. Pundits are even forecasting a price of up to $2000 over the next few years, although that may be regarded as far-fetched.

But have you considered classic clocks? Longcase (grandfather), grandmother, and other top-range historical timepieces?

Expert horologist David Cooper comments, “People often don’t realize that a high-class timepiece, such as a longcase clock, holds its value and is a very good investment in the long run.”

Older clocks score over other antiques as investments because, as well as serving as fine pieces of furniture, they also have utility value as timekeepers.

The first mechanical clocks were introduced on the cusp of the 13th and 14th centuries. But it was the invention of the pendulum in the mid 17th century which brought a dramatic improvement in the accuracy of timekeeping. Clock makers went to extraordinary lengths to gain the smallest advance in technology. The future of the British Empire depended on mastery of the seas, and an accurate clock enabled longitude to be determined with life-saving precision.

America was the first country to make mass-produced clocks when Eli Terry of Connecticut shipped an order of 4000 in 1806.

Traditional clocks come in all sizes and shapes, and modern reproductions are often of very high quality. The investor who wants to clock up a profit need look no further than a specialist horology showroom somewhere on a local Main Street.

It’s not widely known that reinvesting dividends can greatly increase returns on share investment.

Dividends are a welcome addition to investor’s returns on their shares. They represent the portion of profits that companies distribute to shareholders.

Growth in dividends from shares in the UK has outpaced inflation over the last 20 years, according to M&G. Indeed, they have grown by 31 percent over the past three years.

Ben Willis, Head of Research at Whitechurch Securities said, “Volatility in the market can benefit the long-term investor. If you reinvest dividends you get more units for your money, which puts you in a stronger position when markets rebound.”

Reinvesting rising dividends often bring handsome returns. Anyone who invested in, for example, the M&G Extra Income fund 20 years ago will have doubled their capital and would have received total net income payments of 176 percent of their original investment, despite taking the dividends as income. Those who reinvested those same dividends would have seen their investment increase fivefold in the same period.

Surveys have shown that women invest in the stock market far less than men do; they have a different view on the risks and possible gains and are much less confident of their ability to invest wisely. But, when they do try the stock market, they generally do better than men, choosing dependable stocks and ignoring the get-rich-quick options.

Kiplinger suggests that couples should invest together, thereby complementing each other’s strengths and weaknesses. The man can encourage investments in higher yield stocks and the woman restrain him from his wilder excesses.

Which seems like a good plan to me!