Guest Post by Ol’ Remus
Imagine a deflation so severe, so catastrophic and long-lasting, with so many banks collapsing that cash all but ceased to circulate. Imagine towns and cities so desperate for physical currency they printed their own 
. Imagine cash having measurably more buying power with each passing week. Imagine half of all banks closing their doors forever. Imagine surviving banks making a dependable and risk-free real profit from money they didn’t lend. This was the Depression, and it lasted for about a decade.
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Before the Crash of 1929 there had been pullbacks, in 1923 and again in 1926, significant but short, each lasting a year, each followed by greater expansion than before. Soon everything that wasn’t agriculture became a bubble. It’s understandable, everything was new—radio, paved highways, movies with sound, refrigerators, air travel and skyscrapers—it was the dawning of a new era with an incandescently bright future.
The forward looking would be the foremost citizens of this new era, which meant buying in. And buy in they did. Mortgages, car loans, time payments—and for 16% of the population, stocks on margin.
If the crash was unimaginable, the follow-on catastrophe was unthinkable. The economy immediately contracted in one memorable spasm. In mere weeks the future went from daydreams of opulent splendor to a search for lost change in the couch cushions. The middle class became the poor, the poor became the destitute. Then it got worse. The gross national product declined by a third. Trust in government and finance crumbled away. Populism ran the table. Regime change was in the air.
Today a dark consensus is forming of a similar debacle, probably in the fourth quarter, possibly sooner. The evidence is compelling: record highs in the stock market supported by inflation* and bubbles and the Plunge Protection Team, a Shiller price-earnings ratio at 29x, negative returns for the bottom 250 of the SP500, accelerating consumer and retail bankruptcies. Major crimes on Wall Street and in DC go uninvestigated, trust in government and finance is in the single digits, unsold new and used cars are constipating the pipeline, real unemployment is far above official numbers, and the middle class is tapped out.
It’s a given the stock exchanges will crash. Beneath the financial highway lies an ever-growing sinkhole and one day the market will be overweight enough to crash through. Price discovery will have been served at last. The prudent are thinking past it to second order events, where the demons live.
More photos from the Crash of ’29 will appear in upcoming Woodpile Reports.
* Inflation since 1929 is 1,330%. This gives an idea of how severe a runaway deflation could be. Using 1929 as the base, if we squeezed the accumulated inflation out of it, a twenty dollar bill would be worth $286 in purchasing power.
Be smart. If you can take $5,000 to $10,000 out in slow withdrawals of $20 and $10 bills, and put it in a safe place, where only you can access it. Don’t buy gold, no one will transact it. If you believe in silver, buy coins that can be easily be used or exchanged. If you cannot get, or do not have the suggested dollars to have on hand, then start now taking periodically as much as possible from any income or account, to reach your cash on hand goal. The goal should be 3-6 months of a personal calculated survival minimum monthly expense. Base items like mortgage, food, utilities, etc. Time is getting shorter every day. Don’t be a wild prepper, be a calm protector of those you love.
BD, it seems to me that if a mortgage is one of your base items, you’re fucked. Mortgages can be called for no reason at all, especially if the bank holding the mortgage fails, or is failing.
I agree with you about getting your cash out, though. The kind of crash that seems inevitable might make your FRNs worthless, so PM coins seem to be the only choice. Silver coins might be the best bet, as you said.
It’s likely that the fed’s currency would be reissued as a sweep-up measure, with federal agencies like the IRS going after any and all assets held by citizens. In a reissue scenario, the old currency would become non-negotiable past a certain date and exchanging the old for the new, your cash holdings would be made subject to the fed’s knowing who has how much. It would also mean that the rate of exchange could be arbitrary as well.
That’s what happened with gold certificate notes starting in 1933 as the fed was given ownership of all the gold held privately. Today only paper or electronic certificates of bullion (owned by anyone foolish enough to buy paper gold certs) would be the only gold holdings that the fed could sweep up without sending armed agents out to take bullion and coin held by private owners.
I think that things are going to play out in ways that I haven’t been able to imagine, so your guess is as good as mine about whether owning gold will be feasible. If I’m doing business and accepting gold coins and making change in silver, that might be a way for business to be conducted at one level, who knows?
I believe contract laws state that one party cannot claim a property from another unless there is a default of some means. Mortgages are legally binding, on both parties, contracts. The government is the only entity I know that can claim the right to assume property of anyone at will by eminent domain. If the banks could simply attempt control of any property at will, the property would magically end up destroyed or burned beyond use in riots and payback. Plus what good is it to hold a property that cannot be sold to anyone else? That is a increasing liability not an asset.
Secondly there is too much currency in the international world, not just the US, to cause a reprint of any kind in my opinion. More likely is the confiscation of all kinds of funds along with any large bills,using government paper, or notes and bonds, in exchange. If currency is to be restricted it will be anything over a $50 bill.
Thirdly the government wants the country to go to a paperless world where they can see and control the flow of every dollar. However almost 75% of the small dollar transactions, $20 or less, are done by paper or coin, and not everyone has a account, a credit card, or EBT card. Paper/coinage is all they know or ever use. You cannot take away the only means of survival for people and have no chaos. Small bills will not be exchanged or removed.
IMHO
Finally if you look closer at the depression times you will find below the news and big money world was a world of barter and small bills/coins that were used whether worthless government issue or not. They were a means of exchange and easy transaction. That’s how people survived for thousands of years.
https://www.youtube.com/watch?v=zPGb4STRfKw
“Imagine surviving banks making a dependable and risk-free real profit from money they didn’t lend. ”
It’s hard to imagine that. I thought that banks make a profit through loans. Service charges on income held by a bank, wouldn’t pay interest paid on the money a bank is holding for the customers, would it? I don’t know a lot about banking, so I can’t imagine how a bank would make a profit by accepting deposits, paying interest on them, and just holding the money without making any loans on it.
“Imagine towns and cities so desperate for physical currency they printed their own” ……….
One small town near me already has been. The currency is only trad-able in that town for the goods and services needed to survive.
Only one problem…… the taxman!! He stomped on that one real quick!
Excellent article BTW
Stack silver and lead.
don’t forget toothpaste and TP
I recall that Boulder City, during the building of Hoover Dam, did circulate it’s own company owned currency during the Depression era…
I’ve also heard that under certain conditions, a bank could “call in” a mortgage in full at any specific point…
…’course, I’ll leave the keys inside the burning edifice as I walk away….
The yield curve is not going to invert for another 1.5 years at least, more likely 2.5. Billions of dollars a day is being printed to buy up equities. There is absolutely zero impetus to stop it. To say there is going to be a crash within the next 6 months with all this crazy crap going on, is nothing short of malicious ignorance. What is more likely to happen is that inflation simply expands further. But as we know, inflation is funneled into areas that are not included in the “official” statistics. So you can expect tuitions to rise another 10%, health care premiums and deductibles another 10%, and little bits here and there, and the headline number will be gamed at just under 2%. There is no political will to stop any of this, so therefore it will not stop.
For what it’s worth, they switched the military script on us overnight in 68. The excuse was the black market. It didn’t hurt the servicemen because we were allowed to exchange any we had on us at the moment. It was the little guys in the civilian market that were crushed.
Also I think in the initial stages of a collapse of the kind I think we will have here silver, gold and script won’t have much value till maybe 3 months out. I only base this on my own experience when the 68 Tet hit. Were were trapped and couldn’t get much brought in for 4 weeks. During that time only food and bullets had any value. Depending on what we had the most of any given day, that was the least valuable of the 2. Money wouldn’t buy a tin of peanut butter. Of course we had water but other guys said water was even more valuable where they were. I don’t know if that will apply today but it left an indelible impression on me and it’s what I’m basing my own plans on. I keep silver, bullets and food and 2 years of inhalers. When they go I go with them.
That Monopoly Money ain’t worth Jack. The economy is Guns and Butter. Want some, go get some. Inflation is about 30-40% from what I’ve seen. Everything is three or more times more expensive than when Junior Bush was playing Goobermint.
Trump’s actually worse than Obama. All those fake paper gains in the Stock Market should blow that bubble up. The Banksters are sweating like TNT in the Summer. They’re talking crazy shit NOW.
Like giving away Monopoly Money. They call it “Guaranteed Income”. Its hangman insurance for Greedy Capitalist Counterfeiters on Wall Street and your local Bunk and Trustus.
Have a Happy Festivus fatties. Stuff your ass with Corn Syrup. The Revolution is Brewing like Coffee. Can you smell it?
Spot on about the real inflation rate.
30-40% correct?
how about some sources,or at least numerous common examples?
Red, the closing lines of Ol’ remus’s article seemed skewed to me, also:
“Inflation since 1929 is 1,330%. This gives an idea of how severe a runaway deflation could be. Using 1929 as the base, if we squeezed the accumulated inflation out of it, a twenty dollar bill would be worth $286 in purchasing power.”
In 1929, a $20 gold coin contained about .96 ozt. of gold. That would make a $20 double eagle (that you could get at a bank in exchange for that $20 note) worth $1212.00 approximately in melt value. Inflation in terms of real money is greater than most calculations I’ve read.