Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Time to take the RED Pill - 28th May 24
US Economy Slowing Slipping into Recession, But Not There Yet - 28th May 24
Gold vs. Silver – Very Important Medium-term Signal - 28th May 24
Is Gold Price Heading to $2,275 - 2,280? - 28th May 24
Stocks Bull Market Smoking Gun - 25th May 24
Congress Moves against Totalitarian Central Bank Digital Currency Schemes - 25th May 24
Government Tinkering With Prices Is Like Hiding All of the Street Signs - 25th May 24
Gold Mid Tier Mining Stocks Fundamentals - 25th May 24
Why US Interest Rates are a Nothing Burger - 24th May 24
Big Banks Are Pressuring The Fed To Losen Protection For Depositors - 24th May 24
Another Bank Failure: How to Tell if Your Bank is At Risk - 24th May 24
AI Stocks Portfolio and Tesla - 23rd May 24
All That Glitters Isn't Gold: Silver Has Outperformed Gold During This Gold Bull Run - 23rd May 24
Gold and Silver Expose Stock Market’s Phony Gains - 23rd May 24
S&P 500 Cyclical Relative Performance: Stocks Nearing Fully Valued - 23rd May 24
Nvidia NVDA Stock Earnings Rumble After Hours - 22nd May 24
Stock Market Trend Forecasts for 2024 and 2025 - 21st May 24
Silver Price Forecast: Trumpeting the Jubilee | Sovereign Debt Defaults - 21st May 24
Bitcoin Bull Market Bubble MANIA Rug Pulls 2024! - 19th May 24
Important Economic And Geopolitical Questions And Their Answers! - 19th May 24
Pakistan UN Ambassador Grows Some Balls Accuses Israel of Being Like Nazi Germany - 19th May 24
Could We See $27,000 Gold? - 19th May 24
Gold Mining Stocks Fundamentals - 19th May 24
The Gold and Silver Ship Will Set Sail! - 19th May 24
Micro Strategy Bubble Mania - 10th May 24
Biden's Bureau of Labor Statistics is Cooking Jobs Reports - 10th May 24
Bitcoin Price Swings Analysis - 9th May 24
Could Chinese Gold Be the Straw That Breaks the Dollar's Back? - 9th May 24
The Federal Reserve Is Broke! - 9th May 24
The Elliott Wave Crash Course - 9th May 24
Psychologically Prepared for Bitcoin Bull Market Bubble MANIA Rug Pull Corrections 2024 - 8th May 24
Why You Should Pay Attention to This Time-Tested Stock Market Indicator Now - 8th May 24
Copper: The India Factor - 8th May 24
Gold 2008 and 2022 All Over Again? Stocks, USDX - 8th May 24
Holocaust Survivor States Israel is Like Nazi Germany, The Fourth Reich - 8th May 24
Fourth Reich Invades Rafah Concentration Camp To Kill Palestinian Children - 8th May 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Economic Depression, Stagflation, Stag-Depress-Flation

Economics / Great Depression II Feb 03, 2017 - 07:16 AM GMT

By: DeviantInvestor

Economics

The United States suffered through a deflationary depression in the 1930s. Stock prices crashed, currency in circulation declined, commodity and real estate prices fell hard and human misery prevailed.

President Roosevelt revalued gold from $20.67 to $35.00 per ounce in 1933 – a substantial devaluation of the dollar. Make-work and government spending programs were implemented. War followed the depression.


Then the United States suffered through the “stagflation” of the 1970s. The economy stagnated and inflation rose to previously unheard of levels. The Vietnam war, inflation and social protests dominated the news, gold shot upward from $42.00 to over $800 per ounce and the dollar bought much less. Government spent massively on the Vietnam War and social programs.

Those two eras had a number of commonalities – war, more government programs, excessive government spending, social unrest, and escalating gold prices.

Both were periods of weak or negative economic growth. The 1930s were deflationary and the 1970s were inflationary.

Stag-Depress-Flation of 2017 – 2025 might be next:

How and why? Everything is wonderful – we have new DJIA highs and a new President. Yes, but:

  • Official National Debt is nearly $20 Trillion, an outrageous sum. Corporate and personal debt, including mortgages, credit card debt, auto loans and student loans are huge and difficult or impossible to pay.
  • 95 million Americans are without jobs but are not included in the calculations so we are told the official unemployment rate is low.
  • Most people live paycheck to paycheck and have little savings and minimal retirement funds.
  • Interest rates peaked in the early 1980s and declined until last August. A 35 year trend that has reversed suggests interest rates will increase for years or perhaps decades. Those increasing interest rates portend bankruptcies, declining corporate profits, higher unemployment, derivatives crash, and increasingly squeezed Americans overloaded by excessive debt, even if they retain jobs.
  • Higher interest rates will weaken the real estate market – already happening – and most certainly will hurt the refi market – already happening. The auto market will suffer – already happening.

CONCLUSIONS:

  • Economically the U. S. is in trouble. We have far too much debt, too many regulations, a deeply entrenched establishment taking more than their share and massive but ignored unemployment.
  • Social mood is deeply divided. Replay the SAG awards for a sample, or look at the number of protests in the past month.
  • The country and populace are divided. The “left coast” and Hollywood are convinced that nothing good can come from a Trump Presidency, while “flyover America” rejoices and traditional media outlets fan the flames of anger, resentment and betrayal. Eight years of disgust with President Bush begat eight years of disgust with President Obama which begat the President Trump era. The country is more polarized than at any time since the anti-Vietnam War marches in the streets of America.

Another example of a divided country is the picture and comment shown below.

  • The Fed deeply fears deflation because the risk of an economic crash is high, tax revenues decline during deflationary episodes, and everything leveraged with debt is vulnerable.
  • Expect the Fed to do whatever is necessary to increase inflation, “print currency,” promote QE, and more. Currency in circulation will increase rapidly.
  • As currency in circulation increases, consumer prices rise. Stocks are already overvalued, bonds are declining (interest rates rising) so expect the newly created fiat currencies to flow into commodities. Prices will increase in commodities, gold and silver, as occurred in the 1970s.
  • Hemmingway said, “The first panacea for a mismanaged nation is inflation of the currency; the second is war.” Consumer price inflation – never mind the official numbers – is here and increasing. Next is more war.
  • Stagflation: Too much debt is a drag on the economy. Rising interest rates suggest bankruptcies and declining earnings – hence minimal or no growth. This is the stagflation part of the scenario.
  • Depression is an extended period of negative or low growth, such as in the U. S. economy since 2008. Many believe the U. S. entered the “Greater Depression” and never emerged.
  • Inflation: The military believes that war is good for the economy. The previous President, who won a Nobel Peace Prize, dropped 26,171 bombs on foreign nations during 2016. Expect more war. Consumer price inflation always follows war.
  • Expect much more inflation, like the 1970s and worse, as government and the Fed “stimulate” the economy with currency printing, QE, war, and spending. Congress likes spending projects and wars. The Fed likes devaluation of the dollar and inflation of the currency. The dollar has lost, compared to gold, over 98% of its value since 1913. Expect further devaluation of the dollar.
  • President Trump may be wonderful or the worst, but can he fix 100 years of mismanagement and corruption?
  • Expect Stag-Depress-Flation in the coming years.
  • Expect much higher gold and silver prices in upcoming years.

Gary Christenson

GE Christenson aka Deviant Investor If you would like to be updated on new blog posts, please subscribe to my RSS Feed or e-mail

© 2017 Copyright Deviant Investor - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Deviant Investor Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in