Guest Post by Doug Casey via International Man
Just because society experiences turmoil doesn’t mean your personal life has to. And a depression doesn’t have to be depressing. Most of the real wealth in the world will still exist—it will just change ownership.
What is a depression?
We’re now at the tail end of a very long, but in many ways a very weak and artificial, economic expansion. At the same time we’ve had one of the strongest securities bull markets in history. Both are the result of trillions of new dollars created over the last decade. Right now very few people are willing to consider the possibility of tough times—let alone The Greater Depression.
But, perverse though it may seem, this is the very best time to think about it. The U.S. economy is a house of cards, built on quicksand, with a tsunami on the way. I urge everyone to read up on the topic. For now, I’ll only briefly touch on the nature of depressions. There are at least three good definitions of the term:
- A period of time when most people’s standard of living drops significantly.
- A period of time when distortions and misallocations of capital are liquidated.
- A period of time when the business cycle climaxes.
Using the first definition, any natural disaster can cause a depression. So can living above your means for long enough. But the worst kind of depression has not just economic effects, but economic causes. That’s where definitions 2 and 3 come in.
What can cause distortions in the way the market operates, causing people to do things they’d otherwise consider unreasonable or uneconomic? Only government action, i.e., coercion. This takes the form of regulation, taxes, and currency inflation.
Always under noble pretexts, government is constantly directly and indirectly inducing people to buy and sell things they otherwise wouldn’t, to do things they’d prefer not to, and to invest in things that make no sense.
These misallocations of capital subtly reduce a society’s general standard of living, but the serious trouble happens when such misallocations build up to an unsustainable degree and reality forces them into liquidation. The result is bankrupted companies, defaulted debt, and unemployed workers.
The business cycle is caused mainly by currency inflation, which is accomplished today by the monetization of government debt through the banking system; essentially, when the government runs a deficit, the Federal Reserve buys its debt, and credits the government’s account at a commercial bank with dollars. Using the printing press to create new money is largely passé in today’s electronic world.
Either way, inflation sends false signals to businessmen (especially those who get the money early on, as it filters through the economy), making them overestimate demand for their products. That causes them to hire more workers and make capital investments—often with borrowed money. This is called “stimulating the economy.”
Inflating the currency can actually drive down interest rates for a while, because the price of money (interest) is lowered by the increased supply of money. This causes people to save less and borrow more, just as Americans have been doing for years. A lot of that newly created money goes into the stock market, driving it higher.
It all looks pretty good, until retail prices start rising as a delayed consequence of the increased money supply, and interest rates skyrocket to reflect the depreciation of the currency.
That’s when businesses start failing. Stocks fall. Bond prices collapse. Large numbers of workers lose employment.
Rather than let the market adjust itself, government typically starts the process all over again with a new and larger “stimulus package.” The more often this happens, the more ingrained become the distortions in the way people consume and invest, and the nastier the eventual depression.
This is why I predict the Greater Depression will be … well … greater. This is going to be one for the record books. Much different, much longer lasting, and much worse than the unpleasantness of 1929-1946.
Editor’s Note: A financial depression far greater than any crisis America has seen could soon strike. For some it could completely wipe out their savings… and for others it could be the fortune-building opportunity of a lifetime. Doug Casey and his team just released an urgent video on surviving and thriving during an economic collapse. Click here to watch it now.
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Go long on TP.
Doug? Was that your 100 donation? Thanks!
I am curious what starts this? I think its the next election. I think liberals will lose their minds, even worse than last time. The folks on the left appear willing to do anything to be in power and push their very strange agendas forward. Plus all the glorious doom porn presented here on TBP Shows us heading that way.
Very little doubt that the next crash’ll be a doozie. So big, it’ll probably the very last one. Nevertheless, cats like Casey have been saying such things since ’08. Still buying pmags and wool socks though. Just in case the eventual becomes the present.
>>>cats like Casey have been saying such things since ’08.
Just for the record, Casey and others have been been pushing essentially the same “next crash” prophecy since the 1970s.
They will, of course, ultimately be proven correct.
This time is different.
My take on how the next depression will go is far different than Doug Casey’s version.
My opinion is it will be precipitated by the crippling sanctions and tariffs we are putting on many nations around the world; and particularly on those productive nations, that supply us with so many imports.
These nations are currently engineering ways to go around our sanctions and trading with each other, either by barter, gold, and honoring each others currency. As time goes by they will perfect their trading mechanisms and adapt them to the products they trade in agriculture and durable goods.
When this happens the sanctions will be useless and not only that… they will refuse the dollar and demand gold for the products they export to us.
I believe this will happen all at once with China and possible South America & Europe. We will be screwed.
With no durable goods coming in, nor parts for our assembly lines here, nor replacement parts for foreign durable goods we have already purchased and because our foreign distribution networks will be shut down; we will rapidly descend into depression. And as a result of the massive unemployment in the services industry due to massive unemployment in the global corporations that bring us our imports from countries that no longer want to sell us their goods in dollars, we will suffer greatly from lack of prosperity.
The government can create all the money they want but there will be nothing to purchase. It will be like the Soviet Union before their fall. Very few goods and long lines. People will have plenty of fiat money and credit cards to purchase food but nothing else. That is if the farmers don’t go bankrupt.
It will be a time of chaos and confusion. And since many are no longer innovative we can expect no solutions and certainly no vision from our leaders to get us out of our mess. This will result in mass emotional depression and suicides; especially among the young people.
Our vast administrative laws that regulate business and labor will work against the creation of new businesses to fill the void of manufacturing that will be needed to get us out of this modern economic depression we will find ourselves in. And don’t expect our monopoly corporations to create any new manufacturing because these corporations are not creative. Their present day brands were bought by investor money. Not created by them. They outsourced the manufacture of these brands to other countries only to see today the very likely probability that their manufacturing plants will be shut down or taken from them by their host countries.
This new depression will see millions that were once consumers become unemployed. This will mean by by cell phones and cable TV for millions. It won’t be pretty. People will be driven nuts by boredom.
The massive tax loss to municipalities will cause an equally mass layoff of public workers which will dramatically reduce public services. This will create a lot of lawlessness that will not be contained due to the lack of law enforcement.
Large groups of angry young people will be roaming the streets. Back in the 1930s most people still had morals and ethics. Not so today. So crime will go through the roof.
Probably Doug Casey sees some of the same scenarios that I do but he doesn’t want to tell you the raw facts that can happen in this next depression.
All I can say is have a well thought out plan for the next depression when it happens.
Thanks.
“and particularly on those productive nations, that supply us with so many imports”
Really?
Such as the trash and trinkets from China that fill walmart?
The plastic-shit-on-the-shelf in the other homogenous retail hell?
Ah, Doug Casey…..
I discovered him in 2011 when he convinced me we were going to lose world reserve currency status any minute now and I better hurry to buy silver out the fucking ass, swearing it would go to the moooooon!
I predict articles like this will be continued to be written until they are proven correct.
Well, if you’re going to put it that way, I won’t recommend you read the latest original content by Michael Snyder. Since it’s brand new, I’m sure I have no idea what the content will be. Certainly, it won’t be about the Ring of Fire, Earth Changes, 20 Examples of How X is Worse Than Ever, or America is on the Verge of Collapse!
I think I was wrong. Admin posted new Snyder article. Surprise! It was about earthquakes.