Shhhh…It’s Even Worse Than The Great Depression

[Carl]

Shhhh…It’s Even Worse Than The Great Depression (http://www.zerohedge.com/news/guest-post-shhhh%E2%80%A6-it%E2%80%99s-even-worse-great-depression)


Good Read...

*Oh, here's a small quote:

"So I’ve got a whole bag of “Fuck You!” for anyone who still thinks nothing could be worse than another Great Depression. The path we’re on ends with mountains of corpses when the great experiment fails."

[osoab]

I subscribe to "Green Shoots".

[Carl]

I subscribe to "Green Shoots".

Attach a span to it, reverse the order and deny the use of a blindfold...

Yep, works for me...

[chad]

2 clients of 15+ years notified me this week that as of xmas, they are calling it quits. i'm up to 11 now this year.

[Horn]

http://acrossthestreetnet.files.wordpress.com/2012/08/velocity.png?w=604&h=362

Attention 1-9er, give me quad R, ready for takeoff .


http://www.youtube.com/watch?v=kwJyzyLQ6H0

[Serpo]

In 1920, a loaf of bread soared to $1.20, and then in 1921 it hit $1.35. By the middle of 1922 it was $3.50. At the start of 1923 it rocketed to $700 a loaf. Five months later a loaf went for $1200. By September it was $2 million. A month later it was $670 million (wide spread rioting broke out). The next month it hit $3 billion. By mid month it was $100 billion. Then it all collapsed.

….In 1913, the total currency of Germany was a grand total of 6 billion marks. In November of 1923 that loaf of bread we just talked about cost 428 billion marks.

[vacuum]

I've noticed gas prices dropping significantly recently. What this tells me is economic activity is slowing down. We may be on the edge of another 2008, but we've already done all the bailouts and QE possible, so there is nothing to stop us this time. Of course there are 'level 2' measures I'm sure which we aren't thinking about yet (or maybe we're up to level 3 or level 4 measures). But these new measures will kick things up a notch, we'll start seeing things like people's retirement accounts get commandeered, social services discontinued, retirement payments curtailed. Basically quality of life going down and people in the streets unhappy about it, just like what we've been seeing in Europe.

[chad]

it may just be a regional thing, but here's what i can count in my town that has closed since august:

a wendy's
a large regional grocery store
a goodyear tire place
an ace hardware
a subway franchise
a fashion bug store
a hardees
a local mom and pop eatery
a pool store

these are just the ones i know about because i drive past them on the way to my kids' schools. this is in a town of 8,000 people. things where i live are bad& getting worse.

[vacuum]

Btw, it's interesting to note that that article is from August.

[Ponce]

In 1920, a loaf of bread soared to $1.20, and then in 1921 it hit $1.35. By the middle of 1922 it was $3.50. At the start of 1923 it rocketed to $700 a loaf. Five months later a loaf went for $1200. By September it was $2 million. A month later it was $670 million (wide spread rioting broke out). The next month it hit $3 billion. By mid month it was $100 billion. Then it all collapsed.

….In 1913, the total currency of Germany was a grand total of 6 billion marks. In November of 1923 that loaf of bread we just talked about cost 428 billion marks.

But...........if you had gold or silver that loaf would still cost $1.20..........all that you hace to do is to remember the jar of ham in that movie "Soilent Green" that went for $175.00

[Libertytree]

Wrong..only in the regard that people now don't have a clue as to what the value of gold or silver is.

[chad]

i always hear all of these weimar germany stories where you could buy a city block or whatever for a gold coin, but i never hear actual cases of people buying buildings or whatever for one gold coin. something is being left out of the narrative.

[Sparky]

it may just be a regional thing, but here's what i can count in my town that has closed since august:

a wendy's
a large regional grocery store
a goodyear tire place
an ace hardware
a subway franchise
a fashion bug store
a hardees
a local mom and pop eatery
a pool store

these are just the ones i know about because i drive past them on the way to my kids' schools. this is in a town of 8,000 people. things where i live are bad& getting worse.

I know what you're all saying in this thread, but I'm going to play the devil's advocate. We may suffer a drop in standard of living greater than the drop that occurred during the Great Depression, but the actual standard will remain far above it.

Let's look at Chad's list for context of standard-of-living:

1) Fast food had not yet been conceptualized. You couldn't get warm food on the go.
2) There weren't any regional grocery stores. The transportation infrastructure was not yet in place to support it. Widespread refrigeration wasn't even available yet.
3) Car tires had inner tubes. The invention of steel belted radial tires was more than a decade away.
4) There was no store "franchising". Selection was less, price (relative to income) was higher.
5) Mothers still "made" clothes for the family.
6) There were not enough residential swimming pools to support the idea of a pool store.

So, it's all relative when we say "worse than the Great Depression". I don't know if a monetary/financial collapse where you drop from 100 down to 20 is really worse than when the standard was 10.

[Libertytree]

I know what you're all saying in this thread, but I'm going to play the devil's advocate. We may suffer a drop in standard of living greater than the drop that occurred during the Great Depression, but the actual standard will remain far above it.

Let's look at Chad's list for context of standard-of-living:

1) Fast food had not yet been conceptualized. You couldn't get warm food on the go.
2) There weren't any regional grocery stores. The transportation infrastructure was not yet in place to support it. Widespread refrigeration wasn't even available yet.
3) Car tires had inner tubes. The invention of steel belted radial tires was more than a decade away.
4) There was no store "franchising". Selection was less, price (relative to income) was higher.
5) Mothers still "made" clothes for the family.
6) There were not enough residential swimming pools to support the idea of a pool store.

So, it's all relative when we say "worse than the Great Depression". I don't know if a monetary/financial collapse where you drop from 100 down to 20 is really worse than when the standard was 10.

I don't think you're playing a devils advocate as much as you're illustrating the real situation at hand, for the most part.

[Horn]

I don't think you're playing a devils advocate as much as you're illustrating the real situation at hand, for the most part.

Which is more depressing than the great depression.

[vacuum]

We may suffer a drop in standard of living greater than the drop that occurred during the Great Depression, but the actual standard will remain far above it.

One thing to consider is that since so many things no longer require much manual labor, it's also probably more difficult to make some small amount of money to get by than it was previously. There aren't as many "things that need doin" which someone could do for a plate of food.

[woodman]

That was a good read Carl. Thanks. I love the comments after internet articles. Sometimes they are the best part of the link. Here are a couple I thought perty good.

Mon, 08/20/2012 - 17:04 | http://gold-silver.us/sites/all/modules/slashcomments/images/permalink.gif (http://gold-silver.us/news/guest-post-shhhh%E2%80%A6-it%E2%80%99s-even-worse-great-depression#comment-2721690) nope-1004 (http://gold-silver.us/users/nope-1004)
http://www.zerohedge.com/sites/default/files/pictures/picture-5230.jpg (http://gold-silver.us/users/nope-1004)


The word "billion" gets thrown around today like it's some small number. Is a billion cars a lot of cars? Is a billion people a large crowd? What about a billion dollars? Some perspective:
A billion seconds ago it was 1980. A billion minutes ago was the time of Jesus. A billion hours ago was the stone age. A billion days ago no one walked upright.
Yet a billion dollars ago was 8 hours and 20 minutes at the present clip that Ben hyper-depresses the world. Fiat is clearly worthless.
This government is sick!! Massive depression we are in, held together with paper clips and perception economics. What a joke.








Mon, 08/20/2012 - 17:08 | http://gold-silver.us/sites/all/modules/slashcomments/images/permalink.gif (http://gold-silver.us/news/guest-post-shhhh%E2%80%A6-it%E2%80%99s-even-worse-great-depression#comment-2721709) Abiotic Oil (http://gold-silver.us/users/abiotic-oil)
http://www.zerohedge.com/sites/default/files/pictures/picture-33257.jpg (http://gold-silver.us/users/abiotic-oil)


Whatever ails the economy, it is nothing that 750 million hollow points can't solve.

[Ponce]

Liberty? and that's why I also keep a lot of cash handy.......but.......sooner or later they will learn the real value of silver and gold once they see the rich people talk about it.

About the gold coin? it was from Hilton and that's how he started the chain of hotels.

[chad]

Liberty? and that's why I also keep a lot of cash handy.......but.......sooner or later they will learn the real value of silver and gold once they see the rich people talk about it.

About the gold coin? it was from Hilton and that's how he started the chain of hotels.

hilton was started in 1919 in texas. no gold coin was involved. the entire hilton chain was built in texas on "scared" oil money.

[Ponce]

Thanks Chad, maybe the article that I read was Si-Fi? I am goin right now to learn more about Hilton.

[Cebu_4_2]

Thanks Chad, maybe the article that I read was Si-Fi? I am goin right now to learn more about Hilton.

Here Ponce I googled it for you:

https://encrypted.google.com/search?tbm=isch&q=hilton&tbs=imgo:1&biw=1680&bih=884&sei=thDAUJukEZCy9gTEooHACQ

[mamboni]

The author is correct: we are in a great depression here and now. But, he makes a brilliant point within this exposition that is the real pearl of the article and cannot be emphasized enough: the people in charge suffer from a severe form of Narcissistic Personality Disorder. This means that they are in love with themselves and their ideas and logic be damned. No matter how much misery they cause and economic depression their policies exacerbate, they are incapable of seeing that their policies are at fault. On the contrary, they insist that what is needed is more of their policies and more control by them. It is a sick, warped world view and it will be deadly for society. These people in charge are narcissists and sociopaths. They feel absolutely no compassion for anyone outside themselves. They can lie as easily as you or I tell the time of day. Their idea of morality can be summed up thusly: if I do something, be it theft or graft or embezzlement or fraud, and no one stops me and I don't get caught then it was OK to do it. This is the sick, parasitic, predatory mentality of these people - believe it.

[Dogman]

The author is correct: we are in a great depression here and now. But, he makes a brilliant point within this exposition that is the real pearl of the article and cannot be emphasized enough: the people in charge suffer from a severe form of Narcissistic Personality Disorder. This means that they are in love with themselves and their ideas and logic be damned. No matter how much misery they cause and economic depression their policies exacerbate, they are incapable of seeing that their policies are at fault. On the contrary, they insist that what is needed is more of their policies and more control by them. It is a sick, warped world view and it will be deadly for society. This people in charge are narcissists and sociopaths. They feel absolutely no compassion for anyone outside themselves. They can lie as easily as you or I tell the time of day. Their idea of morality can be summed up thusly: if I do something, be it theft or graft or imbezzlement or fraud, if no one stops me and I don't get caught then it was OK to do it. This is the sick, parasitic, predatory mentality of these people - believe it.

Very well said and true!

It is the mentallity of getting mine and the hell with anyone else! Being self centered now for yourself is more the norm than the exception today.

I would love in my lifetime that I have left on this world would be to see these kind of people that have driven this country into the dirt. Pay in a very public and appropriate way for it. Public hanging is or would be to easy.

The hell with saying you are sorry and be forgiven. Shamed for life is more appropriate.

[gunDriller]

Their idea of morality can be summed up thusly: if I do something, be it theft or graft or embezzlement or fraud, and no one stops me and I don't get caught then it was OK to do it. This is the sick, parasitic, predatory mentality of these people - believe it.

and if they play the game right, they can get a Big Award - a Nobel Prize, a Pulitzer, an Academy Award.

[General of Darkness]

I subscribe to "Green Shoots".

I inject them

[Hillbilly]

i always hear all of these weimar germany stories where you could buy a city block or whatever for a gold coin, but i never hear actual cases of people buying buildings or whatever for one gold coin. something is being left out of the narrative.

I read a book on Hitler years ago and it had one tinny little blip on how that was done: You could not buy things outside of the black market for Gold or Silver you could not trade Gold or Silver for Cash either you had to leave the country trade your Gold or Silver for US dollors or British pounds then fly back to Germany then exchange the US Dollars or Pounds for Marks then you could make your purchase. Hitler did that and bought several News Paper companies and realestate. You basically have to alreaddy be a "mover and shaker" to get out of the country in the first place. But that's how it was done.

[BillBoard]

There will be no Wiemar Hyperinflation in America. It is all about usury and credit collapse. The rich will become richer and the poor more in debt or dead.

Carl has already told you all why, it would be a waste of electrons to rehash it again.

[General of Darkness]

There will be no Wiemar Hyperinflation in America. It is all about usury and credit collapse. The rich will become richer and the poor more in debt or dead.

Carl has already told you all why, it would be a waste of electrons to rehash it again.

Man Billboard, I didn't realize that Carl told it, and it was wide spread knowledge. Since I'm in a shit mood, let me say this. Go fuck yourself because the internet is based on links, kinda like you and that dad you don't know. And those links actually help when someone is looking for the truth. I bet if you jewoogled CARL HAS ALREADY TOLD YOU ALL WHY, this thread comes up. Most of us know this stuff, but don't be a dickhead, that's my job.

[mamboni]

There will be no Wiemar Hyperinflation in America. It is all about usury and credit collapse. The rich will become richer and the poor more in debt or dead.

Carl has already told you all why, it would be a waste of electrons to rehash it again.

Wiemar Hyperinflation sets a pretty high bar on permissable inflation - LOL. IMHO, we will see 1970's era inflation: not nearly Weimar but 20%+ per annum for 7-8 years. This is high enough to drive consumers into pre-emptive purchasing of goods and hard assets ahead of the inevitable price increases like the mid-to-late 1970's. The one big difference from then is this time it won't be American consumers buying, but foreign dollar holders buying up American property, businesses (the few that are stll domestically owned), land and select iconic American goods. When the dust settles, the dollar will be devalued to 33% of present purchasing power vis-a-vis gold. Therefore, gold will hit $5000 and the gold : DOW price ratio will approximate 1:1. Most Americans (80%) will be destitute with virtually no net worth or assets, 1% of Americans will own the bulk of what's left of domestic assets; and 19% will be what's left of any assemblance of a previously large and vibrant middle class, consisting mainly of professionals, small business owners catering to old constipated boomers and folk wise enough to be in no debt with good cash flow and holdings in precious metals. The economy will have hit bottom, and enough debts cleared for Kondratiev spring to begin. This will be the time to convert you gold and silver into productive assets, stocks and real estate.

[Carl]

Wiemar Hyperinflation sets a pretty high bar on permissable inflation - LOL. IMHO, we will see 1970's era inflation: not nearly Weimar but 20%+ per annum for 7-8 years. This is high enough to drive consumers into pre-emptive purchasing of goods and hard assets ahead of the inevitable price increases like the mid-to-late 1970's. The one big difference from then is this time it won't be American consumers buying, but foreign dollar holders buying up American property, businesses (the few that are stll domestically owned), land and select iconic American goods. When the dust settles, the dollar will be devalued to 33% of present purchasing power vis-a-vis gold. Therefore, gold will hit $5000 and the gold : DOW price ratio will approximate 1:1. Most Americans (80%) will be destitute with virtually no net worth or assets, 1% of Americans will own the bulk of what's left of domestic assets; and 19% will be what's left of any assemblance of a previously large and vibrant middle class, consisting mainly of professionals, small business owners catering to old constipated boomers and folk wise enough to be in no debt with good cash flow and holdings in precious metals. The economy will have hit bottom, and enough debts cleared for Kondratiev spring to begin. This will be the time to convert you gold and silver into productive assets, stocks and real estate.

I admire your optimism.

I could be wrong but if the panic sets in, I don't think foreign held dollar denominated credit will survive to make it back here in any significant quantities.

And I don't believe domestically held dollar denominated credit, which populates every bank account in the U.S., will fair much better.

Credit dollars are totally dependant upon bank survuval and bank survival is totally dependant upon the value of assets held, which must be equal to or of greater value than the credit issued.

By that criteria, all of the TBTF banks, to include the Fed, are broke, busted. Creating new credit with new debt will not fix their situation, and the only reason no other country calls them on it, is because they're in the same predicament.

[Horn]

How does that "Forced Credit System" from LW.. tie into this thread?

Once Wall Street Banks own everything they'll drive a portion of the economy on O-Credit rationed Greenbacks.

Then the rest of the world can sit on their dollars as gold while the domestic dollar falls or simply phases out,

[Mouse]

I admire your optimism.

I could be wrong but if the panic sets in, I don't think foreign held dollar denominated credit will survive to make it back here in any significant quantities.

And I don't believe domestically held dollar denominated credit, which populates every bank account in the U.S., will fair much better.

Credit dollars are totally dependant upon bank survuval and bank survival is totally dependant upon the value of assets held, which must be equal to or of greater value than the credit issued.

By that criteria, all of the TBTF banks, to include the Fed, are broke, busted. Creating new credit with new debt will not fix their situation, and the only reason no other country calls them on it, is because they're in the same predicament.

Why would dollar denominated chickens not come home to roost? Speculators will use frn to buy every commodity there is worldwide, but ultimately, the $'s have to come home. The only way out of that is default. How do you define survive? Please correct me as I am a simple minded person and there are many angles I have not thought of. What happens when shit hits? When the dollar is about to go to bed, the US still runs on it. They will buy up any and all things that can be bought with it, much of which will be US assets

What do you mean by domestically held dollare denom credit? On whose ledger? Do you mean credits as in the digits in customer accounts? Or do you mean credit lines? I suspect the former. Bank runs will shut this tap off quickly, agreed. Those who have it will spend it and pay off all debt, feeding the black hole.

Credit dollars/bank survival are only dependent upon the lies that reserves are sufficient. We have already seen mark-to-mars as GAAP. We have already seen the "invisible hand" of the Fed create whatever digits are required and outright buy or swap shit for assets for "real" digits. The FED can lie forever.

Agreed on your last point, but the window dressing charade can indeed go on, for a very long time. The new credit is ultimately UST growing the monster of the FED balance sheet. I also agree that every other country is on board with it, because the swap lines run deep. They are all cooperating on a coordinated and engineered devaluation of every human on the planet.

Insert your favorite Hypertiger quote here ----------------

Not arguing with you, just trying to strike up some ideas.

Regards,

M

[Carl]

If the dollar loses value to where it's worth little to nothing, how much will a promise to pay a dollar be worth?

The only reason credit currency continues to flow is the underlying assumption that it can be converted into paper cash at anytime at the discretion of the credit user. Once that assumption is demonstrated to be a lie, credit will cease to function and those holding positive credit will start to demand payment.

Same thing happened in the thirties resulting in the cascading collapse of credit as currency. (The convertability of paper into gold at the time was a secondary issue.)

[palani]

If the dollar loses value to where it's worth little to nothing, how much will a promise to pay a dollar be worth?

The promise to pay IS the payment. In a society that does not respect private property it might be said that the only thing you own is your signature. If you think you own anything the only item you have to exchange for that thing is the signature.

Certainly a signature (not an autograph mind you although that is your property as well) as payment saves a lot of ink and trees.

[mick silver]

when i start to see people living on pinto beans i will know were in a Great Depression . from what i been told you were lucky if you had a bowl of beans then .

[Carl]

when i start to see people living on pinto beans i will know were in a Great Depression . from what i been told you were lucky if you had a bowl of beans then . We'll get there mick, the worse is yet to come.

[Dogman]

We'll get there mick, the worse is yet to come. If we do not start getting some snow pack and with the dropping water tables. It is getting mighty dry in the breadbasket states that are/may be going to blow away. If the snow/rains fail this year.

[Sparky]

...
Credit dollars are totally dependant upon bank survuval and bank survival is totally dependant upon the value of assets held, which must be equal to or of greater value than the credit issued.
...
Hasn't this paradigm changed over the last four years? The government has indicated that they are willing to own ALL debt. They are absorbing all the bad CDS mortgage debt. They have taken over the ever-expanding student loan debt. Through the Fed, they're buying up all of their own Treasury debt, and releasing FRNs into the system. They have dramatically reduced the role of banks in the credit dollar game. As such, the relationship between interest rates and lending risks is being hugely distorted, which is what really puts the whole financial system at risk.

For this reason, we'll continue to go through this psuedo-deflationary period, before the inflation sets in. I'm in mamboni's camp, though I think they can get away will lower "high" nominal inflation rates, more like 7-15% for a decade or two. Although I suppose in real terms, that translates to 10-20%.

So I see two events: 1) a transition from psuedo-deflation to high inflation, and 2) a dislocation in the bond market and soaring interest rates. I haven't really figured out the relationship or timing between the two. Markets have become so distorted, it's hard to figure.

[Carl]

No that paradigm hasn't changed, they may have managed to temporarily suspended the rule, but it's still very much in play.

In my opinion, what we're currently experiencing is the result of the Fed/Gov's massive efforts to front run the collapse with massive injections of new credit/debt, which does not give value to any of the underlying assets, especially so when it has been demonstrated that none of the new credit is circulating within the actual economy at any value producing velocity, and that's because all of our value producers were paid to ship their production offshore.

I'll just say that it's not conducive to anyone's long term well being to hope that they can induce a sustaining rate of inflation through new debt creation on top of the debt that's already dragging us into economic oblivion.

We aren't Japan...

[Sparky]

No that paradigm hasn't changed, they may have managed to temporarily suspended the rule, but it's still very much in play.

In my opinion, what we're currently experiencing is the result of the Fed/Gov's massive efforts to front run the collapse with massive injections of new credit/debt, which does not give value to any of the underlying assets, especially so when it has been demonstrated that none of the new credit is circulating within the actual economy at any value producing velocity, and that's because all of our value producers were paid to ship their production offshore.

I'll just say that it's not conducive to anyone's long term well being to hope that they can induce a sustaining rate of inflation through new debt creation on top of the debt that's already dragging us into economic oblivion.

We aren't Japan...

I respect your thoughtful opinion. But what happens if the government simply sells Treasurys to the Fed ad infinitum, and uses those newly created FRNs to hire every unemployed person in the country, and pay every social security recipient their full nominal amount as promised? That would prevent the newly created FRNs from stagnating as bank reserves. Wouldn't that be inflationary? In essence that's the path we are on.

[Horn]

I respect your thoughtful opinion. But what happens if the government simply sells Treasurys to the Fed ad infinitum, and uses those newly created FRNs to hire every unemployed person in the country, and pay every social security recipient their full nominal amount as promised? That would prevent the newly created FRNs from stagnating as bank reserves. Wouldn't that be inflationary? In essence that's the path we are on.

Wouldn't they need a decoupling/deliminator from the dollar firstly, (or round about the time they wanted to do it). Basically issuing ration credits that evaporated within a months time same as food stamps. Bigger ticket items would simply place a reduced limit on the monthly credits received.

Then place the rest of the program to phase the existing domestic notes, in the same way as Odeathcare is geared will phase out everything else.

[Neuro]

I know what you're all saying in this thread, but I'm going to play the devil's advocate. We may suffer a drop in standard of living greater than the drop that occurred during the Great Depression, but the actual standard will remain far above it.

Let's look at Chad's list for context of standard-of-living:

1) Fast food had not yet been conceptualized. You couldn't get warm food on the go.
2) There weren't any regional grocery stores. The transportation infrastructure was not yet in place to support it. Widespread refrigeration wasn't even available yet.
3) Car tires had inner tubes. The invention of steel belted radial tires was more than a decade away.
4) There was no store "franchising". Selection was less, price (relative to income) was higher.
5) Mothers still "made" clothes for the family.
6) There were not enough residential swimming pools to support the idea of a pool store.

So, it's all relative when we say "worse than the Great Depression". I don't know if a monetary/financial collapse where you drop from 100 down to 20 is really worse than when the standard was 10.
You have pretty much stated the reason why a majority of people came out of the great depression alive. You had mothers who could cook and make clothes, people knew how to preserve food without refrigeration. Farmers were low tech, and could repair the farm equipment themselves, and could take their produce directly to a small grocery store, that were able to sell their products at a profit which would be spent or invested in the local community. Ordinary people had gardens where they could grow their own food, instead of swimming pools which will only breed mosquitoes... Take out the fragile supply chain for technology and food, and you will have a collapse from 100 to 1, while the great depression had a collapse from 10 to 5. I guess the irreversible and rapid collapse to 1 will happen somewhere between 40 to 20, and we are at around 60-70 today...

[Carl]

I respect your thoughtful opinion. But what happens if the government simply sells Treasurys to the Fed ad infinitum, and uses those newly created FRNs to hire every unemployed person in the country, and pay every social security recipient their full nominal amount as promised? That would prevent the newly created FRNs from stagnating as bank reserves. Wouldn't that be inflationary? In essence that's the path we are on.
The path we're on is total credit currency collapse. I think you can look to Iceland to get a better grasp of the situation. While the Fed/Gov may instigate the collapse, it will be the failure of the banks to pay upon demand the notes the credit they've issued promised, that will do credit currency in. And the reason there will be a demand for the cash notes is because the amount of credit currency issued far exceeds any asset values the currency is supposed to represent.

Everybody keeps saying that all that currency will seek tangible assets but because they have a habit of conflating credit with money, the skip over the fact that the first tangible asset credit currency will seek redemption in, is actual Federal Reserve Notes and that, the banks don't have. To us and everybody else it's gonna look like a collapse of the dollar, just like the initial reaction to the bank failures in Iceland was portrayed to look like a collapse of the krona, but it wasn't the krona that collapsed, it was the bank issued credit currency that was given the krona's name.

If the resort to using FRNs it will be after credit has already collapsed, or as Horn puts it; a "decoupling/deliminator from the dollar firstly", only it will be from the dollar denominated credit currency. Or we can put it another way, a U.S. Default on its debt.

[Sparky]

Carl, during the 2008 when the financial system was on the brink, the government snapped its fingers and moved 500 billion digital dollars into their reserves, to "save the system".

If the scenario you are describing starts to play out, why wouldn't we expect to see a Presidential Executive Order to distribute a few trillion dollars in paper FRNs to the banks, to "save the system"? That's the big inflation scenario to counter you deflationary scenario.

[woodman]

Carl, during the 2008 when the financial system was on the brink, the government snapped its fingers and moved 500 billion digital dollars into their reserves, to "save the system".

If the scenario you are describing starts to play out, why wouldn't we expect to see a Presidential Executive Order to distribute a few trillion dollars in paper FRNs to the banks, to "save the system"? That's the big inflation scenario to counter you deflationary scenario.


Yes indeed. All they have to do is change the rules to fit the scene. Until they can no longer squeeze blood out of the rock that is a dismembered society.

[FreeEnergy]

it may just be a regional thing, but here's what i can count in my town that has closed since august:

a wendy's
a large regional grocery store
a goodyear tire place
an ace hardware
a subway franchise
a fashion bug store
a hardees
a local mom and pop eatery
a pool store

these are just the ones i know about because i drive past them on the way to my kids' schools. this is in a town of 8,000 people. things where i live are bad& getting worse.

I am adding to Libertytree' comments here

>> wendy's
good riddance, bad fast food. in our area, I see "fancy" fast foods, dunkin donuts and starbucks opening like crazy. one would think somebody gotta close up to make room

>> regional grocery store
in our area, I saw national franchise taking over an excellent healthy food regional store. then they fumbled, introducing their own crap food lines. then they saw they fumbled and reintroduced organic. doing strong. at another plaza, a third chain store is trying to survive, somehow they all think its an area with not enough cheap "bottom dollar" food stores. wonder who goes there, 'cause I'm sure it's not most people from my neighborhood

>> goodyear tire
have they been overcharging for service?
I have a friend who's in gas stations business. car mechanics have been struggling for the last 5 years, it is hard to lend out bays. it is a trend.

>> ace hardware
again, every time I go there I find higher prices than lowes or home depot. that, and online is probably not helping them either

>> a pool store
naturally downturn is not the best time for pool owners. in my area , I saw a pool / pond place go under, now it is a yard / landscaping business.

[Carl]

Carl, during the 2008 when the financial system was on the brink, the government snapped its fingers and moved 500 billion digital dollars into their reserves, to "save the system".

If the scenario you are describing starts to play out, why wouldn't we expect to see a Presidential Executive Order to distribute a few trillion dollars in paper FRNs to the banks, to "save the system"? That's the big inflation scenario to counter you deflationary scenario. Yes, the government snapped their fingers and we were instantly 500 billion more in debt, and kept snapping their fingers and now we're over 14 trillion in debt.

The gov would have to nationalize the Fed first, which would instantly kill credit, if it wasn't dead already, and a few trillion wouldn't even begin to cover the debts banks owe. A few trillion to the banks would never make it out of the banks and into circulation. Europe and the Euro would also collapse.

More likely, the government would nationalize the banks and ration credit currency to the people through their debit cards, which would drive prices up because no one will want to accept the credit. Cash will be king.

But that part is just a guess.

[Sparky]

Coincidentally, here's a very thoughtful article posted today on ZeroHedge that discusses the opposing forces of inflation and deflation, which set the stage for the balancing act attempted by central governments. It nicely describes the effects that Carl talks about, but also describes the scenario in which the inflation cat can be let out of the bag. Even if you disagree with the conclusion, it nicely covers all the forces at work. Not an easy read, but informative and thought-provoking.

http://www.zerohedge.com/news/2012-12-07/guest-post-where-here

[woodman]

Good read Sparky.

From the comments after the article:

"Liquidation of the unfunded liabilities will have to start at some point, my guess 1-2 billion unfunded will have to go"

He is talking people here. Sounds Hypertigerish.
And this next guy is a great post. I love his avatar by the way.


cranky-old-geezer (http://gold-silver.us/users/cranky-old-geezer) http://www.zerohedge.com/sites/default/files/pictures/picture-17905.jpg (http://gold-silver.us/users/cranky-old-geezer)




I agree it's a stupid article full of nonsensical theories, but it's no more stupid than your comment.
Sorry you idiot, the government and banks do not have unlimited power to expand the system, the Romans were down to chipping the edges off their silver coins.
Tell me about Wiemar Germany and Zimbabwe. They printed so much currency to pay debt, the currency eventually lost all value.
There's no limit on Fed's ability to create currency ("print currency") and there's no limit on the federal govt's ability to borrow. So yes, they have unlimited power to expand debt and money supply.
Roman empire didn't have paper currency nor computers nor checking accounts. They couldn't expand the money supply by printing more currency nor adding "deposits" to someone's checking account punching keys on a computer.
They were limited to physical coins, where America started out, physical gold & silver coins, so they had to rob metal from coins and make more coins (debasing the coinage) to expand the money supply, just like our govt would have had to. Or start making coins from other metals like copper, zinc, etc. Even then they would have been limited by the amount of metal available.
But when you can print currency on a printing press, the only limit is paper and ink.
When you have computers and checking accounts, there's no limit at all. You can add 50 trillion dollars to someone's checking account just as easy as adding 5 dollars, punching a few keys on a computer.
Say what? They must have something to put on the asset side to keep the books in balance?
No problem, write up a promissory note for 50 trillion dollars, they sign it, put it on the asset side. That's all it takes, books are in balance.
And no, writing off that 50 trillion debt does NOT make that 50 trillion in their checking account vanish. It's still there, they can still write checks on it.
The debit side of that writeoff accounting entry does NOT go against their checking account, it goes to writeoff expense on the P&L, eventually reducing bank profit ...bankrupting the bank in this case
...unless they get a 50 trillion bailout from the Fed ...also just a "deposit" in their reserve account at the Fed, done with a few computer keystrokes, accompanied by Fed taking possession of 50 trillion of some (worthless) "securities" the bank has
...or "rehypothecating" (worthless) securities the bank already has pledged as collateral somewhere else ...or pledged as collateral over and over again many times.
Now the money supply has been expanded 100 trillion dollars, 50 trillion by the bank, 50 trillion by the Fed.
Where do we go from here? Hemorrhaging govt debt funded by hemorrhaging currency printing, continually expanding the money supply far faster than GDP (which is actually shrinking).
Where do we go from here? Hyperinflation then currency collapse, just like Wiemar Germany, just like Zimbabwe.
Why do I call it a looting spree, as I have in many comments on many articles of this type?
Becuase the Fed is looting all the wealth out of the economy, from the people, to keep the govt and big banks going.
That's what you can do when you issue the currency and have a printing press. You can loot a nation dry, steal all the wealth from the people, giving it to whomever you want, the govt and big banks in this case.

[gunDriller]

The path we're on is total credit currency collapse. I think you can look to Iceland to get a better grasp of the situation.

even during a collapse, people will need "something to trade for something else".

as it was during during caveman times. then, i imagine a lot of what was worth trading was perishable.

now, the medium of exchange - the US $ - is once again proving perishable, in a different way.


during collapse, people will flail around feverishly looking for safe places to put their money. that's when gold and silver will stand out.

i wonder how aluminum cans will do ? they aren't exactly portable, but aluminum is very useful - when you have a foundry.

(one word - Bullets. :) )


i think the US $ will continue to hold some value during collapse, because it will remain a useful medium of exchange for existing business contracts written in dollars.

the major fall in the perceived value of the US $ will be when large bond-holders like China dump their $ holdings - like they are already doing.



my guess is, part of the US' "strong dollar policy" will extend beyond mere currency manipulation. they will intentionally fuck up other countries' & other countries' currencies, so that the US $ is among the "Last Man Standing".

[Carl]

1929 - 1944 = Very Strong Dollar Policy.

Collapse Credit As Currency = The Strongist Dollar Policy Possible.

As you say gunDriller, people will want to remain in commerce.

[Libertytree]

As stated, people will always try and want to be in commerce, it is the natural state of things, being free to engage in commerce is one of the main tenets of liberty. Folks during the depression did very well or at least as best as possible, both agriculturally and industrially because they had the knowledge and resources available. The problems I see are that we no longer largely have the knowledge and resources and to make it even more difficult TPTB it seems have done everything they can to quash most types of self sustainability and I'm led to believe that would be even moreso the case in their attempt to have complete control.

[10 Bears]

even during a collapse, people will need "something to trade for something else".

as it was during during caveman times. then, i imagine a lot of what was worth trading was perishable.

now, the medium of exchange - the US $ - is once again proving perishable, in a different way.


during collapse, people will flail around feverishly looking for safe places to put their money. that's when gold and silver will stand out.

i wonder how aluminum cans will do ? they aren't exactly portable, but aluminum is very useful - when you have a foundry.

(one word - Bullets. :) )


i think the US $ will continue to hold some value during collapse, because it will remain a useful medium of exchange for existing business contracts written in dollars.

the major fall in the perceived value of the US $ will be when large bond-holders like China dump their $ holdings - like they are already doing.



my guess is, part of the US' "strong dollar policy" will extend beyond mere currency manipulation. they will intentionally fuck up other countries' & other countries' currencies, so that the US $ is among the "Last Man Standing".

My thinking is USD will not collapse all the way but merely devalue enough to devalue massive Gov debt like in Argentina over the last few decades. Right now especially since 2003 we have seen a 30% devaluation already...another 30-40% would solve a lot of Gov problems.

Either way I'm good though. Been planning into this since the 2002 *Emergency Interest Rates were discussed in late 2001. No worries.

[Sparky]

It's a valid point that the diminished lack of self-reliance is a factor in assessing whether we are headed for a "worse" Depression.

But there are counter-arguments to that as well. A single self-reliant person can teach 50 loved-ones self reliance in a short amount of time once they are willing learners. If TSHTF, there will be a lot of willing learners.

Yes, resources will still be short, but I'm not sure that net resources per person will be less than the 1930s. True, there will be "haves" and "have nots", and things won't be pretty for the "have nots". But that was true during the previous Depression.

It seems that maybe trying to assess whether it will be "worse" is semantics. More likely it will be a mix of similarities and differences.

[Sparky]

And I'm not in the USD collapse camp either. We have a $90T debt/liability shortfall over the next 50 years, on a base monetary supply of $15T. That can be covered with an average of 10% annual currency devaluation over 21 years. There might be a "shock" year mixed in there at 20% to get everyone's attention, and lots of years between 5% and 15%, but a USD collapse doesn't need to be part of the equation.

[Horn]

http://acrossthestreetnet.files.wordpress.com/2012/08/velocity.png?w=604&h=362



You're a technical guy aren't you, Sparky, which cliff is steeper & deeper?

And how can that grey area at the end not extend out past 2012?

[Libertytree]

I'm reminded of what my oldest aunt said and that I've heard from others as well..."We were so poor that we hardly noticed there was a depression going on at all".

[Carl]

And I'm not in the USD collapse camp either. We have a $90T debt/liability shortfall over the next 50 years, on a base monetary supply of $15T. That can be covered with an average of 10% annual currency devaluation over 21 years. There might be a "shock" year mixed in there at 20% to get everyone's attention, and lots of years between 5% and 15%, but a USD collapse doesn't need to be part of the equation.
Hey Sparky, what's our trade poor economy and the rest of the world doing while the government goes about debasing the currency (going further into debt) to afford its bills?

Oh and, our actual monetary supply base is at around $1.4 trillion.

[10 Bears]

UGH... Me had to do that.:)
I guess in these days I would be called a Prepper or a NUT~. But in 1999 when I first started buying silver and gold that term was not yet in use. In 2001 6 months before I retired I put 100% of my life savings in gold and silver because inflation is what EATS retirements. I was then 48.. 49 at retirement. I never used 401Ks or IRAs preferring to guide my own destiny. Too many rules.

In 2010 the wife retired at 51 and I put her retirement savings into silver after taking an excruciating tax hit because she had a 403b. Be that as it may we keep cash around but main savings is in physical metals.

I get the folks who say "all eggs in one basket not good". Bullshit! I put in North of $240k in 2001 and more since. Folks might want to do the math. My eggs did well.

Getting back. Since Katrina I did a full court press on water, food, medical herbs, seeds, alternative heat and power, guns, ammo, security, spare parts, communications, sustainable food sources, drying, canning and trade goods. We buy preps weekly.
Last three years average $800 a month. I buy what we tend to like to eat or use.

This month-DEC I had outgoing not related to household expenses $7400.
Am I nuts? Time will tell. Outcomes will tell. We will all be graded.

I figure better to be prepared early than one second too late.

[gunDriller]

http://acrossthestreetnet.files.wordpress.com/2012/08/velocity.png?w=604&h=362

Attention 1-9er, give me quad R, ready for takeoff .


2012 is in the "White area", so that means the economy is growing.

the government says so.


of course, the US gov. also says it's unhealthy to consume marijuana - in any quantity.

and they say that Scary Muslims did 9-11 - all by themselves.

and the US government also claims to be a democracy.


the US gov. lost their credibility a LOOOOOOOOOOONG time ago.

i feel sort of sorry for neighbors that work for the US gov. that have to echo a party line in order to keep their jobs.

[10 Bears]

What makes me sick is watching evening news. I can never make it through the entire 30 minutes without leaving the room totally pissed off at the lying. We used to laugh a Soviet News Agency Tass and Baghdad Bob. These miserable people are far worse.

[Neuro]

It's a valid point that the diminished lack of self-reliance is a factor in assessing whether we are headed for a "worse" Depression.

But there are counter-arguments to that as well. A single self-reliant person can teach 50 loved-ones self reliance in a short amount of time once they are willing learners. If TSHTF, there will be a lot of willing learners.

Yes, resources will still be short, but I'm not sure that net resources per person will be less than the 1930s. True, there will be "haves" and "have nots", and things won't be pretty for the "have nots". But that was true during the previous Depression.

It seems that maybe trying to assess whether it will be "worse" is semantics. More likely it will be a mix of similarities and differences.
Always the optimist... ;) But what good does it do to teach basic gardening skills, when they starve to death prior to having their first harvest?

[Sparky]

Always the optimist... ;) But what good does it do to teach basic gardening skills, when they starve to death prior to having their first harvest?
I guess I don't envision an abrupt permanent cessation of a functioning society. Rather, I see some type of market dislocation (deflation/inflation, interest rates, financial operations, energy resources, etc.) that may cause an interruption in the way things work (e.g. food production and distribution, to address your example) that could last from as little as a few days to a few months, but most likely a few weeks. This would be followed by a less efficient and productive yet still functioning society, with a lower standard of living.

So maybe food availability will be interrupted, and then return more sparsely with less choice and some rationing. I don't think there has to be a lot of starving to death. But maybe that's just my ApocalOptimist point of view. ;)

[mamboni]

There's no need to worry about a Depression. So what if money velocity has dropped to the lowest levels in history. So what if real unemployment is stuck at 22% and growing. So what if over a dozen states are insolvent and have massively underfunded public pensions. So what if the GDP is going negative -7% in real terms. So what if all the statistics coming out of Wahington and Wall St. are cooked and bogus, and we're like John Kennedy Jr. flying blind in the blackness of night over the Atlantic Ocean....straight down. There is a solution and it's all explained in the film of the year "Financial Crisis - The Movie:"


http://www.youtube.com/watch?v=JL9YET2gg0k&feature=player_embedded#!

[Libertytree]

The hell of it is as we all have seen, it don't take but little and nothin for a situation to go from bad to worse to down right shitty in a heartbeat. Peoples reactions to change, adversity, minor glitches are often extreme panic and anger, anger that gets directed and all too often where it doesn't belong. Put together a string of these "situations" and Houston, we have a problem!

[Horn]

There is a solution and it's all explained in the film of the year "Financial Crisis - The Movie:"

But Darth, what good will printing money do, if none of it reaches the economy?

Only to re-digitize itself in some derived blackhole on wall street, our great flation inhibitor!

Oh I see, its just they way you like it...

[mamboni]

But Darth, what good will printing money do, if none of it reaches the economy?

Only to re-digitize itself in some derived blackhole on wall street, our great flation inhibitor!

Oh I see, its just they way you like it...

"You don't know the power...<wheeze> of the short side! Bob Chapman never told ...<wheeze>you about Leo Wanta. I am your banker. Search your feelings...<wheeze>you know it to be true."

[Horn]

Ah yes, apparently LEO got his, now his name is Leo Gotta-Go Collect.

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[Sparky]

For the record, I hope I'm not being confused with someone who thinks there will be no Depression, or historically tough times ahead.

[Carl]

Here's another chart that brings it home:

http://theeconomiccollapseblog.com/wp-content/uploads/2012/12/Employment-Population-Ratio-2012.png

[Horn]

For the record, I hope I'm not being confused with someone who thinks there will be no Depression, or historically tough times ahead.

Not to worry, Sparky.

Your levity in optimism is appreciated, we can only hope that your suffering will be greater than or equal to our own.

After the return to Earth you will also find it is ruled by Damn Dirty Apes!

[Horn]

Here's another chart that brings it home:

http://theeconomiccollapseblog.com/wp-content/uploads/2012/12/Employment-Population-Ratio-2012.pnghttp://static6.businessinsider.com/image/4c3305de7f8b9a6650580d00-590/the-civilian-employment-ratio-remains-near-historic-lows-hardly-bouncing-at-all.jpg

That's what Bernanke meant by maximum employment.

Its a return to levels from when before women entered the workplace.

[Horn]

Another Fred chart Romney could've used during his campaign probably.

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