Guest Post by Doug Casey
Let’s talk about what conditions will be like and about how you can get through the Greater Depression confidently, comfortably, and profitably. It’s not going to be easy or fun, but it’s possible.
I am of the opinion that what’s happening now isn’t just another cyclical downturn that can be papered over by printing up some more money—although that’s exactly what the U.S. and other governments are doing, and in unprecedented amounts. In fact, what the world’s governments are doing is not only wrong but also the opposite of what they should be doing.
Barring the start of another world war—which is not unlikely—the physical world probably won’t be changed much by the Greater Depression, but the way people relate to the world will change a great deal. And not because of the virus, which is about 90% hysteria; it’s just the pin that broke the bubble.
For roughly a whole generation, the U.S. government’s inflation of its currency has been inviting the whole country to live beyond its means. Living beyond your means is what consumer debt is all about.
Mortgage debt is where it all started, and it allowed people to live in houses much bigger than they could afford. In the Greater Depression that is now upon us, many people won’t be able to pay their mortgages. In fact, they won’t even be able to pay their utilities and taxes; maintenance will be deferred indefinitely. But that’s just the tip of a very big iceberg.
Detroit is illustrative. The city is toast, no matter how many billions the government throws at it.
During the serious downturn between 1980 and 1982, the average car on the road was seven years old, and they were all crappy cars. Today, the American fleet of cars is not only close to brand new, but today’s cars last almost forever. They’re not going to need to be replaced for a long time, and that means that auto sales are going to be in the tank for a long time. Also, in the same way that many can’t afford to pay their mortgages, many will be learning that they can’t afford to own a car.
Many vehicles are going to be abandoned in the lender’s parking lot.
As late as the ‘60s, most people paid cash for a car. Even in the ‘70s, a loan was usually for no more than two years. Now, the standard auto loan is for five to seven years. And many cars are leased, out of necessity.
The average family may now have several expensive new cars in the driveway but typically with negative equity in every one of them. Cars have gone from being a minor financial asset to a major financial liability.
The big default snowball won’t stop there; it will pick up all manner of debt as it rolls along.
For instance, everybody thinks he has to go to college, generally wasting four years grazing at the claptrap smorgasbord tended by liberal-arts profs. With the costs skyrocketing, there are over $1.6 trillion of student loans out. They’ll mostly be defaulted on when English majors find there’s little market for their opinions on social engineering.
Credit card debt will likely be the last crisis to hit. People keep making the minimum payment at 18% as long as possible, and they won’t default until the last minute, simply because they have no further source of funds.
State and city debt represented by municipal bonds is at serious risk because these folks can’t print dollars. And their receipts from income, sales, property, and every other kind of tax are plummeting. At exactly the same time, citizens’ demands are skyrocketing. The $1,200 payments that the Feds are sending out aren’t going to help much—especially since the money came from out of taxpayers’ pockets.
The $24 trillion debt that the government acknowledges it owes is actually dwarfed by the $135 trillion debt from unfunded liabilities for Social Security, Medicare, Medicaid, and such, and this doesn’t include contingent liabilities from FDIC, PBGC, and similar insurance programs.
A large chunk of that debt is held by those nice foreigners who, for years, sent us Sonys and Mercedes in exchange for paper. There’s currently a rush to obtain US dollars because they’re cash and not overpriced stocks and bonds. But that’s going to not only stop but also reverse in the near future, resulting in a much lower standard of living for average Americans.
If there’s a way for them—the governmental and federal geniuses who think they know what’s best—to get us out of this mess, I simply don’t see it. Beginning with the crisis that started in 2008, they’ve used the final arrows in their quiver of phony solutions—namely, the ZIRP (zero-interest rate policy) and quantitative easing (printing money).
What Happened Redux
The problem is that for quite a while now, the U.S. and much of the Western world has been consuming more than they produce.
It’s much as though you borrowed a million dollars for consumption. You’d enjoy an artificially high standard of living… for a while. But when the time came to pay it back, with interest, you’d suffer a very real drop in your standard of living for a very long period.
The enjoyable part of that process is more or less what the average American has been doing for years and is now about to stop doing. But ruinous spending is even more serious in the case of government. It’s a rare American who understands that government debt will eventually reach into his wallet because, in a complex economy, there can be so much delay between cause and effect.
So let’s simplify the matter and look at a two-man economy: a peasant and his king.
Let’s say the peasant produces three tons of food per year. He gives the king one for taxes (after all, kings have to eat too), consumes one himself, and keeps the last ton for seed for next year. The king would like more, but—barring a breakthrough in production technology—there simply is no more grain to be had.
Perhaps financial technology can provide an answer.
And so, after consultation with an economic soothsayer, the king offers the peasant a great deal. Lend the extra ton of seed grain to the king, who will pay it back next year, in time for planting, and with interest.
The peasant buys in, but when he comes back to redeem his scrip and the king tells him that the grain was used for something that seemed like a good idea at the time, it’s obvious they both have a problem. Everyone might starve next year.
This is the problem with government debt in particular. People tend to rely on it as a piece of the cosmic firmament, something with real value. But is the U.S. government essentially different from that of Zimbabwe? The answer is no.
One of the most serious problems of the next era is that it’s very likely that society will believe that what passed for a free market over the last several decades has been discredited.
Reagan, Thatcher, and many other politicians around the world delivered fairly significant tax cuts, privatizations, and some deregulation. These things, coming off a very severe recession of the early ’80s, resulted in what Herman Kahn correctly predicted would be “The Long Boom.” But the boom is now over, definitively. The question is what’s next.
It’s interesting how the world’s social mood seems to change almost in lockstep, at least at major turning points.
The ’30s and ’40s were a horrible time, dominated by statism and represented by characters like Mussolini, Hitler, Stalin, Roosevelt, Peron, Mao, and Franco.
The ’60s was the era of hippies. There were race riots all over the U.S. and student revolts all over the world—the U.S., Europe, and China.
The ’80s, ’90s, and ’00s were the era of the yuppie and his motto: “He who dies with the most toys wins.” It was an era of good times and conspicuous consumption—a bit like the Roaring ’20s.
That came to an end in 2008 when we entered the leading edge of a huge financial storm. It’s a huge storm, and it had a huge “eye.” Now we’re going through the trailing edge. It’s going to be much worse, much different, and much longer-lasting than what we experienced from 2009–2010. I suspect this era will have a lot of anger. A lot of blame. Some real poverty. A good measure of violence. It’s not going to be a mellow time in North America, Europe, or China. It will be worse in the so-called “developing” world, which will stop developing without foreign capital.
Let’s focus on the U.S., the current epicenter.
Bankruptcy on Several Levels
Not only the U.S. government but the American society itself is bankrupt, and unfortunately, the situation is much more serious than economic bankruptcy.
It’s rare for someone to go bankrupt because of one bad decision. It takes many bad decisions, a consistent pattern, and that’s possible only by having the wrong moral philosophy.
America’s moral philosophy has degenerated to the extent that Americans think it’s okay to invade other countries that have not attacked them. I’m not talking about just Iraq, Afghanistan, or Syria, pitiful non-entities on the other side of the world. The degeneration started earlier with even weaker prey like Granada, Panama, Haiti, and the Dominican Republic—and, of course, Vietnam.
America’s moral bankruptcy started with a government policy of inflating the currency, which constitutes fraud, and running up the national debt, which is an obvious swindle because the debt will never be paid. This bankruptcy started with the belief that an income tax was needed to level out incomes, but predictably, it did just the opposite. Boobus americanus thoroughly approved of all this and so much more.
Economic bankruptcy is almost always preceded by moral bankruptcy. And it’s accompanied by intellectual bankruptcy: in this case, the philosophical acceptance of economic collectivism and political statism.
The exact description of the situation is fascism—which, contrary to the History Channel, has essentially nothing to do with police jackboots, bizarre racial theories, or militarism. A fascist is simply one who believes in nominal private ownership of both the means of production and consumer goods—but with strong state control over both.
The word derives from the Roman fasces, a group of rods bound together around an ax. The bound rods offer strength; the ax, destructive power. It’s an image that appeals to the type of people who like to control others.
Fascism wouldn’t have had any appeal for the founders of America who, for a while, fought under a flag that showed a rattlesnake and the warning “Don’t Tread on Me.”
What made America different was its foundation on a philosophy of freedom. That word has been so corrupted and leached of meaning—another sign of intellectual bankruptcy.
America is now economically, morally, and intellectually bankrupt.
The country has wandered so far from its founding principles that it is now no different from any of the other 200 nation-states that have spread across the face of the earth like a skin disease.
The U.S. no longer stands for anything; it’s now just another piece of geography. Forget about “America”; it no longer exists. It’s been replaced by “The United States”—not even “These United States,” a concept that was interred by the unpleasantness of 1861–65.
As evidence, I offer you the current state of affairs.
Bankruptcy is a factual matter. Failing to declare bankruptcy when it has happened only adds to the problem.
Germany and Japan were totally and absolutely bankrupt—economically, morally, and intellectually—in 1945. Following the war, should they have tried to continue with their old currencies, policies, ideas, and institutions (that is, if the Allies had allowed them to)? In a word, no.
They had reached the point where the slate needed to be wiped clean, which it was. Then, within a generation, they went from being bombed-out wrecks to two of the most prosperous economies on earth.
Acknowledging bankruptcy is the first step to moving beyond it. Denying bankruptcy when it is a fact only prolongs and worsens the fact.
One obvious consequence of these layers of bankruptcy is an increasing reliance on government. It seems like a cornucopia to the average person, despite the fact that cheese distributions to the poor some years back, the free cell phones, and now $1,200 “alms for the poor” are among the few tangible benefits it has delivered.
Since the government produces nothing, anything it even seems to provide is at the direct expense of somebody else. This simple fact evades almost everyone, from the most ignorant voter to the most powerful officials.
Government produces nothing but wars, pogroms, confiscations, taxes, inflation, and regulation, but people still, idiotically, look to it for salvation—even though it’s the cause of their worst problems.
This is why I’ve long held that the average person is not as bright as you might hope. Once you get beyond discussing the weather, the state of the roads, TV programs, and sports, there’s often no one home.
And that’s the average person. But by definition, 50% of the population is less than average. And they all vote. It’s not hard to figure how they’ll vote.
I admit to being somewhat removed from life among these people, but it’s hard to see how they can even live on so little money. Maybe they’re smarter than I think. But then, people are tolerably competent at running their own lives; the problem arises when they try to run everyone else’s too. The problem arises when they become politically active.
It’s a near certainty that, facing the Greater Depression, the government is going to come up with something like the Newer Deal. That’s because Boobus americanus desperately wants the government—which he thinks is a magical entity that can do anything and solve every problem—to Do Something. And it will.
But it won’t merely fail to do the right things; it is going to do the opposite of the right things. That’s going to make things quite unpleasant…
Editor’s Note: The economic trajectory is troubling. Unfortunately, there’s little any individual can practically do to change the course of these trends in motion.
The best you can and should do is to stay informed so that you can protect yourself in the best way possible, and even profit from the situation.
That’s precisely why NY Times best-selling author Doug Casey and his team just released an urgent video. It reveals how it will all play out and what you can do about it. Click here to watch it now.
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Part of the problem is today’s immigrants…
There used to be a time when just about ANY immigrant who set upon the shores of America was not only grateful, but willing to shed his “old world” ways and support his adopted country.
He might have not known the language, and found some American customs and practices “strange”, but he fully embraced the idea that he could be an AMERICAN.
He not only embraced the American ideal, but made damn sure that his children fully appreciated the land in which they were born. His children were expected to learn English and become a part of American society.
Contrast that to today’s immigrants, who are only concerned about one thing–American dollars or shekels.
Today’s immigrants care not one wit about the founding principles of this country, the Constitutional principles in which our rights are endowed by our Creator, that our rights are not granted by government but are inherent in us being human, and that the most important thing about being an American is the sense of freedom that he doesn’t want for himself or his offspring.
Today’s immigrants brings their “old-world” customs and squabbles here, demanding that us native-born Americans kowtow to them and change THEIR ways to accommodate his “old-world” ways.
Their children are not encouraged to become Americans and fully assimilate, but are required to maintain their “old-world” customs and ways, even if they run counter to American customs and mores. These old-world customs and ways quite often are criminal in nature, and do nothing to endear him to native-born Americans.
They just do not want to assimilate.
Today’s immigrants do not deserve to be here and should go back to where they came from.
Yes, this especially includes jews, many of who were born here…but hold allegiance to israel.
The other part of the equation for the destruction of the USA is “internationalist free trade”.
“Vulture capitalism” can be defined as the owners of businesses and industries that collude with each other, also in collusion with the “money types” (banksters) and governments, depressing wages solely to increase their stockholder “profits” at the top while impoverishing those who actually WORK, producing their products.
All one has to do is look at today’s CEOs, even in failing companies, being paid exorbitant salaries, along with stock options and other “perks” while pleading poverty, pushing down wages for their employees.
Today’s capitalist “mantra” is that labor costs must be as cheap as possible while the “value” (profit) to the stockholder must be as great as possible. Sacrificing labor on the altar of “maximum profits” NEVER works in the long term.
Of course, in the short term, with cheap Chinese goods flooding the market, the economy looks, good, but without CONSUMERS who hold jobs that pay reasonably well, all bets are off. There needs to be a balance between profits and labor.
Presently, labor is looked upon as a “necessary evil” to be minimized at all costs. The problem arises-without labor there are no consumers. As I previously stated, a “balance” must be maintained. Labor is not evil, but a necessary component of capitalism.
Pre-WW2 Germany’s economic successes and the rapid rise of the German economy was predicated on labor being assigned “value”and monetized-something that is (and has been) missing in capitalist societies today.
If labor costs need to be trimmed to assure “profit”, something is seriously wrong. In fact, in the well-paid American automobile industry, labor costs account only for approximately 10% of total costs.
Offshoring production results in consumers (customers) being “lost”.
As to “tariffs”, the American country ran on tariffs from its inception until 1913, when the “income tax” and “federal reserve” was established.
The American economy is being propped up by the “social safety net” which obscures the TRUE economic situation in the U S .
Anarchyst – capitalism is about competition. Even if all offshoring is eliminated, capitalism is about competition.
Business will continue to reduce costs via automation, and will do so ruthlessly in order to compete.
Re your comment that labor is only 10% of a cars costs, you do not have a clue as to what you are talking about. Because you are failing to take into account the supply chain and their labor costs, and the overhead costs (ie retirement, medical insurances etc) , and the costs of overhead personnel, etc.
The big companies outsource the big labor cost activities to theIr suppliers. They big companies are only assemblers, and their assembly is highly automated, but the actual manufacturing is done elsewhere. Those suppliers use a lot of labor. That 10% figure also would not include over head costs – engineers, admin personnel, etc. Car companies can have about as many overhead employees as assembler employees.
Labor is a necessary evil. Labor is a cost to business, and as such the capital market will minimize it so as to compete. IfI can make a product cheaper, I will do so, although I refused to send work offshore. But I eliminated local labor at every cost effective opportunity. I had to compete.
Your jewish roots are showing…If “ruthless competition” were the basic tenet of capitalism, I would have no problem with it, but you fall into the trap of not recognizing the collusion, dirty dealings, getting financial institutions to ruin competitors by not giving the same financial support to them, based merely on being “friends” with particular firms.
A good example of this was the case of Preston Tucker, seen as a threat by the American auto companies, who used the government Securities and Exchange Commission to drive him out of business.
As to “labor” being a “necessary evil”, you are dead wrong. Labor is a critical component in any economic system. YOU, for one, fail to see that “labor” has VALUE. The CEOs and other vulture capitalists seek to maximize their “profits” while relegating labor to being “a necessary evil”, something that has NEVER worked.
I did not say labor does not have value. I said it is a cost, and as such capitalism will minimize it. And it is a necessary evil – you ever employed anyone? Much less hundreds of anyones? I have, and I tell you it is not fun – it is the opposite of that. It is like pounding your nuts every day with a fucking hammer.
No one in their right mind employees people if they have other cost effective options. Because it sucks to have employees.
At the moment, business cannot automate everything. Hence they are a necessary evil, and yes they have value as you cannot run a business without them.
And the pursuit of profit is the only system that has ever worked.
BTW – I abhor crony capitalism. That is not how I ran my business, which I have now closed. I help about half my employees find other work, and I kept my customers from going broke during the transition. Best I could do. However, the coronavirus shutdown, without discussing the merits of that, has killed some of them off.
I don’t know what type of business you had, but you sound like a micromanging tyrant that no one would find pleasant to work for.
Yes, I have employed good people and my business has prospered because of it. What say you about the CEOs who run their businesses into the ground, expecting their employees to “take the hit” while the CEOs and stockholders bask in vast wealth and “golden parachutes? If employees are expected to “do with less, shouldn’t the CEOs and stockholders “do with less” as well?
‘I refused to send work offshore.’
Seriously? So says the guy who ran away to another country.
P.S. It looks like Spam’s off the menu, so at least you’re safe from that.
I left, but my business did not. Blow me.,
You “had” to compete ACCORDING to “justice laws”! People HAVE to hang for that, since 11/22/63!!!!!!
This is a fantastic article that describes the situation exactly. One thing I might possibly argue with is “It will be worse in the so-called “developing” world, which will stop developing without foreign capital“. He may be right – he’s way smarter than me – but “foreign capital” is just phony fiat currency. They very might well do better without it.
That capital has allowed the populations of those developing countries to expand well beyond their ability to feed such. There is every likelihood that there will be mass starvation in Africa if that capital is pulled. The developed nations never should have fed them, as it may well destroy them entirely in the future.
Correct! The “peace corps” was a phony, communistic transfer of our wealth and nothing else.
US AID is even worse!
So, the problem is debt. Who on earth would ever have guessed that? I am shocked.
The problem is also crony capitalism, the profits are capitalized and the losses are socialized. Llpoh, while you’re here, I would like to know what you think about the 2.2 trillion stimulus and what that and the future stimuluses will do to the economy, the dollar and the country going forward. I would also appreciate your insight into what the Fed is doing as regards markets and debts.
Mygirl – re the Fed and the issues, I am generally clueless. I defer to Admin. He is a savant on that shit, and I hope he will respond to that part of the query.
Re the stimulus – as a rule, I am against welfare in all its forms. The stimulus is just a huge lump of welfare, and as with all such it will be poorly targeted, it will aid the parasitic class and injure the productive – productive businesses and individuals will be hurt to the benefit of the parasitic class. There will be enormous unintended consequences.
This stimulus will be wasted, and it will not be well used. As will be any future stimulus packages. The government is not qualified to dole out welfare, never has been never will be. Private charities are the only ones suited, using private donations.
What could have been done? Spend $2 trillion on infrastructure projects, which are desperately needed. Even if it meant hiring folks to use shovels and such until better preps are made, it would have been a benefit.
But the $2 trillion will be flushed, and it will cause more harm than good.
Re the dollar, I expect it is going to go south as a medium of exchange. Again, Admin is best at these things.
Don’t know if that answers your questions.
Do you really believe they passed out trillions of dollars?
Yes
The Federal Reserve is a bank, a bank that now controls most of the money/assets in this country and much of the planet. It is the bank of last resort, the alpha and the omega. There is no need to formally nationalize anything like say, energy production, because the Fed has effectively purchased them via bailouts.
The covid 19 crisis has been a perfect ruse, a smoke screen that was used to steal trillions of dollars from taxpayers and give that money to the banks, corporations and certain institutions, further enriching the .01% while bleeding the country dry. It also serves to promote the globalist agendas, further the police and surveillance states. The end goal is indeed a New World Order, and the populace has to be frightened, wheedled, bullied and starved into submission for the full enterprise to be complete. We are witnessing the final phases of the creation of a plutocracy, a plutocracy controlled by a handful of people, ruthless and following in the footsteps of Lenin in their ideology and suppression of human rights.
“Tacs” are the black ops solutions you’re looking for(and ARE available) NO ONE is immune to war. Ask Hitler.
You hit on some of what I’ve been thinking. I keep hearkening back to the ’08 bailouts and Bernanke sitting there refusing to admit to how much money went to foreign banks. Trillions went out….then there was all the money that went to Freddie, Fannie and the CEO’s and the bonuses that those banks and Wall Street corps. gave out despite the outcry. I remember the White House ‘switchboard’ shutting down over all the calls demanding NO bailouts and how that went.
I loaned my copy of Atlas Shrugged out, haven’t gotten it back which is annoying because Rand nailed it regarding the looters and cronyists. She also nailed it when she spoke of the ‘scientists’ and media who did the bidding of government hacks to push agendas and propaganda.
like the corona virus?
Smoke screen? Obscuring what? It’s a broad daylight robbery wherein millions of victims hump the legs of thugs stripping their grits
The “fed” is going the way of the steel penny, get used to it.
dougie the real reason no one reads your crap here is that you do not give Quinn money
Give him money and his little minions will promote your writing.
Or syrup.
mags put a document into the hands of a Limbaugh here in the Booty Hill.
chickenshit hsf
“As late as the ‘60s, most people paid cash for a car. Even in the ‘70s, a loan was usually for no more than two years. Now, the standard auto loan is for five to seven years. And many cars are leased, out of necessity.”
Wifey and I were watching tv the other nite. Commercial for either Ford or Chevy came on – forgot. Anyway, now they have an 84 month NO INTEREST loan! WTF. I would imagine very soon we will be looking at 40 and 50 year mortgages.
America is like a junkie: he gets high, and forgets his problems, only to sober up, realize he has problems, and then figures out how to put together enough $$ to go score some smack, and get high again.
money is a tool, what you do with it, and your time, are the recipe for success or failure.
my junkie friends have all realized that: “I can get SS disability for my addiction/disease (I love this country) and then I can get on methadone, and then all my problems will be fixed”
what the junkie, and the American does not realize, is there is no light at the end of the tunnel,
wasting time, getting high, living on debt, it is all the same thing. the junkie will still be a junkie, only now it is on the public’s dime, and there are not enough dimes to go around.
In the future the non productive will no longer have a life line, they will be on the streets, where crime will be rampant. I predict we will soon have no-go zones in big cities, filled with people who can no longer play the game, not because they did anything wrong, but because big $$ closed the fun house, and .gov is hopelessly bankrupted junkie.
live like the grasshopper, wind up in the streets
live like the ant, and maybe, just maybe, you will survive to fight off the swarms of grasshoppers who will be coming your way.
this time the light at the end of the tunnel is a train.
When WE HAVE to go to each and every office in DC and tear these people out of there, strip them, hang them, and leave them upside down outside the office until just a skeleton is left, I DON’T want affirmaTIVE ACTION COPS STOPPING US from saving their pets
If we don’t do this, they are GOING TO DO IT TO US!!!!