Great Depression

Why High Inflation Is Inevitable

How this economic disaster ends is something about which many of us speculate. Two extreme endings are likely — a sudden deflationary collapse or a period of very high inflation/hyperinflation which ultimately cripples commerce and resolves itself in a deflationary collapse. In either case, the deflationary collapse is another Great Depression.

It is important to know which route will occur because of what will happen to asset values along the way. A move directly into a Great Depression will depress severely most asset values, especially common stocks, housing and other hard assets. Bonds, cash and fixed incomes may be beneficiaries in the sense that their purchasing power increases.

If the Great Depression is preceded by hyperinflation, just the opposite will happen, at least through the transition stage. Cash, fixed incomes and bonds will be devalued, perhaps even wiped out, if the hyperinflation is severe. Stocks, housing and other assets are likelyRead More »Why High Inflation Is Inevitable

How Far to Go?

There is no way to reasonably estimate how long the depression will last. Michael Panzner discusses one way to estimate timeframes. Are We There Yet?… Read More »How Far to Go?

Economic Armageddon Seen As Imminent

Suddenly it is getting crowded in the world of those predicting economic armageddon. In a sense, that is comforting for those of us who were early and few. Once relegated to the lunatic fringe, it appears as though this view is expanding, possibly even going mainstream.

.That more are calling for a terrible ending to the crisis does not ensure that it will occur. It does however make those of us who were mostly alone early on appear less crazy.Some of the predictions below suggest we may be approaching an economic equivalent to a Return to the Planet of the Apes.

Kudos to Michael Snyder of Economic Collapse for providing the 12 quotes shown toward the end of this piece. Two quotes struck me as bracketing the range of views:

  • George Soros believes that “financial markets are driving the world towards another Great Depression with incalculable political consequences.” No problem there, but he seems to believe that proper actions by authorities can prevent this ending. It is unlikely; the point of no-return was passed about five years ago. There is nothing that can be done by governments (other than to make things even worse) to avoid the Great Depression ending.
  • Ann Barnhardt is more decisive:

It’s over. There is no coming back from this. The only thing that can happen is a total and complete collapse of EVERYTHING we now know, and humanity starts from scratch. And if you think that this collapse is going to play out without one hell of a big hot war, you are sadly, sadly mistaken.

Her economic ending is consistent with my position of the last two years. A war need not happen in a collapse scenario, although politicians have incredible ability to muck things up more than necessary.

Mr. Snyder did not include the following two quotes which seem appropriate:

— Bill Bonner captures matters nicely, agreeing with Ms. Barnhardt except with no mention of war. Here is his conclusion (emboldening added):

… the world is a lot poorer than it was in June. But back then people still thought the Bernanke team was engineering a ‘recovery.’ Now we know, recovery hopes were fantasies. This is not an economy that can recover. It has to die. Then, a new economy will take its place.

— Phoenix Capital Research provides an opinion and what he perceives as proper investment response:

Yes, I believe that before this mess ends, the financial system as a whole will have collapsed. What’s coming is going to make 2008 look like a joke.

If you have yet to prepare yourself for what’s coming, now is the time to do so. Whether it’s by moving to cash and bullion, opening some shorts, or simply getting out of the markets altogether, now is the time to be preparing for what’s coming (remember, stocks took six months to bottom after Lehman… and that was when the Fed still had some bullets left to combat the collapse).

Here are Mr. Snyder’s 12 shocking quotes from different “experts”:

#1 George Soros: “Financial markets are driving the world towards another Great Depression with incalculable political consequences. The authorities, particularly in Europe, have lost control of the situation.”

#2 PIMCO CEO Mohammed El-Erian: “These are all signs of an institutional run on French banks. If it persists, the banks would have no choice Read More »Economic Armageddon Seen As Imminent