The Bolsheviks are already warming up in DC. During the Great Recession of 2007-08, the United States began to experience deflation, when the inflation rate fell below 0%, marking a measurable decline in the cost of goods and services. The rise of fascism in Europe and the descent into World War II can be linked directly to the same mood which led to the deflation of the excess debt that had been built up during the 1920s. SS, Medicare, etc? Deflation can ripple through the economy, causing some consumers and companies to default on debt obligations. Central banks use monetary policy (such as lowering interest rates) to halt a deflationary spiral and spur demand. Inflation Or Deflation? November 23, 2020 November 23, 2020 The Economic Collapse Blog Leave a comment This is a really odd time to be having a “housing boom”. Later, during the Great Depression, economists challenged that assumption and argued that central banks needed to intervene to ramp up demand with tax cuts or more government spending. A Deflationary Collapse Followed by Hyperinfllation.doc Assuming a “significant magnitude bubble” condition, when the central bank embarks on the practice of debasing our currency in extraordinarily aggressive visible moves via significant interest rate cuts and massive debt monetization, those holding dollars and dollar-based assets you are dealing with corrupt or naieve incompetent, financially illiterate politicians who will literally do anything to prevent the collapse we all know is coming, even if it means just postponing it for a few years and in the process create more destruction and suffering than if they had let the markets re-adjust themselves. Much bigger disasters loom, by the way, since the Social Security and Medicare/Medicaid systems also face certain bankruptcy. RA. Scary essays that I freelanced to Barron’s, the San Francisco Examiner and a number of other publications turned out to have been premature, but I’ve never doubted that the endgame for a global economy glutted by debt would be a deflationary collapse. Japan’s ability to hold its own debt made delaying payments easier, helping the country avoid a sovereign debt default. Consumers and businesses alike begin holding on to liquid money reserves to cushion against further financial loss. The US's deflationary debt unwind will cause the dollar to collapse driving up the cost of imports (oil) and inflation, as has happened in Iceland. One in 1929 where total debt peaked at 260% to GDP. I doubt it. I’ve stopped debating people who don’t address the points I’ve made, many of which pivot on a VERY specific — and highly likely — sequence of events. Skeptics say the Government will make this impossible by simply revving up the printing presses, creating enough money to bail out ‘the system’ regardless of how many dollars it takes. Debt Deflation: A situation in which the collateral used to secure a loan (or another form of debt) decreases in value. Back in 2008, the world financial system almost collapsed. I … If they dump their holdings of Treasury notes, they could cause a panic leading to collapse. This would surely cause a lack of liquidity that in turn, could cause a deflationary collapse of the banking system. Quantitative easing (QE) refers to emergency monetary policy tools used by central banks to spur iconic activity by buying a wider range of assets in the market. ... which led to the collapse of … You suggest that because the new money would lose value as fast or even faster than it is created, they will not try it. In a world with record levels of debt , this could become a very serious problem. Join our Take Request Session on December 1st! Everyone knew once the Fed started on the road to QE there was no way back, that it could never be reduced or stopped as the asset bubbles it helped reflate would collapse, and that is what was shown last December, Mnuchin pressed the panic button and told them to reflate. 5. Which is exactly why you can count on Trump to eventually sign off on Amnesty, it is what the big banks will demand to ensure an ever increasing tidal wave of tenants to keep rents and mortgages in the stratosphere. Copyright © 2009–2020 RickAckerman.com All Rights Reserved. WARNING: Deflationary Collapse Dead Ahead. NYC, London, California etc all in lock down. Consumers have less incentive to spend money today when they can reasonably expect that their money will have more purchasing power tomorrow. Understanding the nuances of deflationary economics offers two clear outcomes for an asset like Bitcoin. It nearly crashed in 2008 and has yet to truly recover from that near catastrophe. I expect that debt would tend to make collapse quicker. And then the peak today where debt is at 380% to GDP. Japan Inc. is a descriptor for that country’s traditional, highly centralized economic system. (Note: Ten-thousand boomers are retiring each day. Altogether, foreign countries own more than $6 trillion in U.S. debt. Could the CB’s be planning to utilize new Basel 3 rules and exponentially increase the price of their balance sheet gold to underwrite the quadrillion in derivatives and $250 trillion of debt? We’ll just have to agree to disagree, JJ. Then you tell me what you think! According to Jim Rickards, the recent market crash we’ve witnessed is just the beginning. The reason that collapse happens quickly has to do with debt and derivatives. That’s the ‘Catch 22’ of a pension system bailout by ‘the government’. Rick, That's because when a dollar loses nearly all its value, then $100 or $1,000 or $100,000 isn't worth much either. If you have any doubts about that, just pay a little visit to a few DMV offices in Los Angeles County Intense deflation was a prominent characteristic of the Great Depression that followed the 1929 stock market crash. Nevertheless, the Fed’s intentions are to slowly hike rates. LOL! The great deflation cycle that started around 35 years ago is about to end with a deflationary collapse because xyz means it can't go to 36 years They will panic and print direct into the economy by passing money/debt to governments at 0.1% or zero coupons like I thought they had been doing already for years with QE Year-on-year, consumer prices dropped for six months in a row to end-August 2009, largely due to a steep decline in energy prices. China owns nearly $1 trillion in U.S. Treasurys. This is the 1929-style depression, where huge amounts of inflationary credit are wiped out through bank failures, bond defaults, and stock and real-estate crashes. The global economy has stopped and money is not being spent. The only way massive deflation will be allowed by the Fed types is an orchestrated “Crash” that allows them to buy up everything for pennies on the Dollar. If they got it, that would be tantamount to hyperinflation. WAY back in 2008, we had a market collapse followed by an economic collapse. These unemployed individuals may have a hard time finding new work during a recession and will eventually deplete their savings in order to make ends meet, eventually defaulting on various debt obligations such as mortgages, car loans, student loans, and on credit cards. Many believe there’s no gold in Ft Knox but if all the CB’s are already in on this coordinated con, why not just take gold up to $1 million an ounce and keep the party going? Financial institutions begin to collapse, removing much-needed liquidity from the system and also reducing the supply of credit to those seeking new loans. The one thing they both have in common is that they are both about to explode. Thereafter we will most probably see a deflationary implosion of all assets and a collapse of most of the financial system. The U.S. economy has been holding on—barely. By using Investopedia, you accept our. However, with the U.S. economy barely growing at 1.5% for the first half of 2015, it won’t take much more of a slowdown to bring growth into negative territory. During the Great Depression, money appeared to ‘disappear’ because in capitalist economies, banknotes are derivatives of credit and debt masquerading as money; and in a severe deflationary collapse, debts default, credit is withdrawn and what appears to be money vanishes. Companies see there margins crushed. Debt deflation is a problem that can have lasting negative effects on a country’s economy. In August of 2008, oil was spiking to 145 a barrel. And then the peak today where debt is at 380% to GDP. ... One option is just to do nothing and let people default on their debt obligations and we have a 1930’s style great depression. Demand Collapse Trumps Supply Shocks. A recessionary gap, or contractionary gap, occurs when a country's real GDP is lower than its GDP if the economy was operating at full employment. Thus, for a time, growing debt can offset the adverse impact of … If the Fed types stay in power, NIRP/ZIRP makes it affordable a la the Japanese CB policy. At this point, people's expectations regarding future inflation are also lowered and they begin to hoard money. A total financial collapse might be next. The LATimes speaks of the "possiblity of deflation." there might just as well have been! Your observation that deflation is inevitable misses one very important fact, this time the Fed has digital money which can be credited instantly to the accounts of every citizen in unlimited amounts(i.e “helicopter money”), the Weimar government had the inconvenience and the obstacle of physically printing vast quantities of paper notes and distributing them. When asset bubbles burst, debt deflation results. You can see two debt mountain peaks. Nevertheless, this can be just an illusion. Such a spiral amounts to a vicious cycle, where a chain of events reinforces an initial problem. – NO! Many ways to nullify all the debt America has piled up. Total debt accumulates over the long-term as shown in the chart below. A deflationary spiral is a downward price reaction to an economic crisis leading to lower production, lower wages, decreased demand, and still lower prices. Deflation occurs when general price levels decline, as opposed to inflation which is when general price levels rise. TOMORROW: A HYPERINFLATIONARY TSUNAMI OR A RIPTIDE OF DEFLATION..OR BOTH. Low demand for a given supply equals low prices. The inflationists are coming out of the woodwork, but they are wrong. Scary essays that I freelanced to Barron’s, the San Francisco Examiner and a number of other publications turned out to have been premature, but I’ve never doubted that the endgame for a global economy glutted by debt would be a deflationary collapse. Is it possible that all the Central Banks are scrambling to add gold reserves to avoid this massive deflation we both agree is inevitable? Fear of Deflation Lurks as Global Demand Drops By Peter S. Goodman Read entire article here. A deflationary spiral typically occurs during periods of economic crisis, such as a recession or depression, as economic output slows and demand for investment and consumption dries up. It also has the option via the government of Universal Basic Income(UBI). In my opinion America is toast on so many levels, that what is going to happen to her can best be described by a term from Physics: Then just 4 months later, oil was hitting 40 bucks a barrel. History' s Biggest Collapse. This chart goes back to the 1980s for scale and perspective. Deflation is the decline in prices for goods and services that happens when the inflation rate dips below 0%. Trump will prove to have been just a speed bump on the way to Dr Zhivago. Deflationary Collapse Ahead? Investopedia uses cookies to provide you with a great user experience. Phase Transition. The economists Milton Friedman and Anna Jacobson Schwartz demonstrated in “A Monetary History of the United States” that a collapse in the quantity of money … – Credit crunch causes collapse in demand, and also in supply via effects on factor demands (e.g. Following the stock market crash of 1929, American economist Irving Fisher published his book The Debt-Deflation Theory of Great Depressions, in which he devised a theory on why economic recessions occur and how a country’s debt burden can affect price levels. Everybody seems to have some theory about why hyperinflation is likely, but I haven’t heard a good one yet. A Deflationary Spiral took hold from 1929 to 1932 whereby debt liquidation and distress-selling led to a contraction of the money supply as bank loans were paid off (those which were not defaulted upon). Kevin, I long to hear a good argument against deflation or for hyperinflation, but this is not it. [What economists today fear in a "deflationary death spiral" scenario is debt collapse and accompanying contraction of the money supply, not deflation itself — markjr] No correlation between deflation or recession or stagnation is evident under commodity money systems. From a monetarist perspective, deflation is caused primarily by a reduction in the velocity of money and/or the amount of money supply per person. The reason that collapse happens quickly has to do with debt and derivatives. Regardless of my sentiments to the contrary, I have to accept that traitors in DC have won Civil War 2.0. The ramifications of the collapse in social mood that caused deflation were felt throughout the 1930s as societies fractured. Hi Rick, Before you assume that such a thing is even remotely possible, substitute the word ‘taxpayer’ for  ‘Federal government,’ because that is who would pay for a bailout.  That’s right: All of us working stiffs would presumably be on the hook…forever, forking over a big piece of our paychecks to cover the bills of down-and-outers in more than two dozen states. Think about a scenario in which Company A has bought Company B for $100 million and funded the transaction by issuing $75 million in debt. The Deflationary Implosion On The Road To Full-Blown Global Collapse. However, with the U.S. economy barely growing at 1.5% for the first half of 2015, it won’t take much more of a slowdown to bring growth into negative territory. Total U.S. household debt … One in 1929 where total debt peaked at 260% to GDP. Anyone who doubts this should be required to answer this question:  Do you actually believe that millennials and gen-xers who are living with their parents till they’re 35, and who are $50,000 or more in hock for mostly worthless college degrees, will be able to foot the bills for baby boomers’ Social Security and Medicare? Oh really? The accumulating bad debts ripple through the economy up to the financial sector, which must then write them off as losses. During the Great Depression, money appeared to ‘disappear’ because in capitalist economies, banknotes are derivatives of credit and debt masquerading as money; and in a severe deflationary collapse, debts default, credit is withdrawn and what appears to be money vanishes. Some economists believe the United States may have experienced deflation as part of the financial crisis of 2007–10; compare the theory of debt deflation. How long can that continue?  My guess is that Illinois, with a fiscally reckless Chicago to help bring it down, will be the first state to go belly-up.  Were the Federal government to come to the rescue, actual ‘helicopter money’ would be needed, since checks would have to go out every month to retirees so that they could meet recurring expenses. It was proposed as a theory by Irving Fisher (1933) to explain the deflation of the Great Depression.. Money supply side deflation. The FED has blown its bug guns and the markets ignored it. I’m a deflationist and long time deflator. Inflation Or Deflation? How would this work if, as is extremely likely, a state pension system goes bust? For example, low interest rate policies used in Japan and the United States in the 1990s to 2000s, which sought to alleviate stock market shocks, showed that a frequent result is abnormally high asset prices and too much debt being held, which can lead to deflation and a deflationary spiral itself. Been going on for decades in California, and it has priced young Legacy Americans out of both the Hispanic and Asian barrios. Interest rates tend to go up in periods of deflation, which makes debt more expensive. The optimistic view is that we will be spared deflation as a result of the Federal Reserve’s very much bolder and swifter policy response to this economic crisis than was the case in 2008-2009. As a result, deflation can cause the real value of national debt to rise. The offers that appear in this table are from partnerships from which Investopedia receives compensation. A deflationary environment might reduce the value of Company B’s business to, say, $50 million. Krugman wanted to place a trillion dollar coin in the Treasury, what’s the difference? When governments try to artificially boost debt and demand in a supply shock, the risk is the creation a massive deflationary spiral driven by debt saturation that is followed by stagflation when supply chains start to … Politicians and central bankers of monetary sovereign nations simply don’t have an incentive to go down that Jenga-tower deflationary collapse route, especially since it was in part due to their policy in the first place that debt was able to get so high. TARP proved to what lengths the owners of the Federal Reserve will go to keep house prices in the stratosphere. Yeah, sure. Get Ready for the Return of Inflation, says Tim Congdon, in a Wall Street Journal op-ed.. Hyperdeflation is an extremely large and relatively quick level of deflation in an economy. Which just happened to both depress wages and add nitro-methane to home prices and rents, just as the first of the Boomers started entering the labor market and housing market. The two largest are China and Japan. )  For more-detailed predictions concerning the impending debt deflation and ways you can prepare for it, click here for a recent interview I did with Howe Street’s Jim Goddard, and here for an interview with Greg Hunter of USA Watchdog. In a recession, demand decreases and companies produce less. They will likely try to raise prices but with the consumer already indebted he will not consume the product. The Covid-19 pandemic has led to an enormous slump in economic activity worldwide. Beyond this, however, some economists are worried about the possibility of deflationary pressure producing a severe debt crisis. If there has not been a decades long Oligarch conspiracy to destroy Legacy America, These are extremely deflationary trends. The economists Milton Friedman and Anna Jacobson Schwartz demonstrated in “A Monetary History of the United States” that a collapse in the quantity of money … What "Collapse… Just like the Patriot Act magically appeared when needed! People would default on their debts, they would lose their houses, and the banks would collapse… All systems where go for a global economy on fire. It is just another phase in the world economy to correct excesses of the 100 or 300 years or even 2000 years. A Deflationary and Debt Death Spiral: How Should Investors Proceed? The inflationists are coming out of the woodwork, but they are wrong. A deflationary spiral occurs when falling prices cause further deflationary pressures to cut prices. And you can bet that the laws and new tax forms to implement those measures are already in PDF as I write this. Even with bailouts, and 80% free salaries, there will be a lot less money in the system for at least a year, causing a huge drop in prices of many assets, especially property. In Greece, deflation exposed the fragility of the financial system, leading to a debt crisis. With this in mind, an economic collapse in the U.S. is not just possible, … The Fate of Debt (and Your House) after a Dollar Collapse Read More » However, debt becomes even more of a burden for businesses in a deflationary economy. Consumers and businesses often decrease spending as a result. Why wouldn’t they do the same the next time??? Slow defaults? It has been keeping upward pressure on rents and house prices since the Immigration Reform Act of 1965. Using monetary policy to spur demand has some pitfalls, however. The Deflationary Implosion On The Road To Full-Blown Global Collapse. Demand Collapse Trumps Supply Shocks. During the Great Depression, money appeared to ‘disappear’ because in capitalist economies, banknotes are derivatives of credit and debt masquerading as money; and in a severe deflationary collapse, debts default, credit is withdrawn and what appears to be money vanishes. Amazing. Open Borders does much more than provide cheap labor and cheaper votes to the Oligarchs! 1929 when world trade collapsed. Deflation creates expectations of further price falls, and therefore consumers reduce their spending because they expect goods to become spending in the future. Deflation in a Debt Based Economy. I don’t see even a slight possibility that deflation can be averted — or ‘not allowed’, as you’ve put it. Think about a scenario in which Company A has bought Company B for $100 million and funded the transaction by issuing $75 million in debt. Karl Denninger Market Ticker Sep 17, 2009. Yuan ,Rubles,Yen, Rupees, Sterling? It is true, that this inflationary aspect cancels out the deflationary tendencies yielding, on the surface, a non-inflationary appearance. At the same time, fortunately, governments and central banks have implemented economic stimulus measures unprecedented in economic history.With such a combination of massive shock and very highly dosed therapy, the question increasingly arises as to whether this will result in inflationary or deflationary … deflation of relative prices) ... • Debt rises and at some point DTI constraint becomes binding • Pure balance sheet effect: borrowing constraint lowers The Iceland example The true definition of inflation is an expansion in the total supply of money and credit in an economy. If that requires the “Twelve in a room in America” of W S Story, so much the better! Deflation—that is, when the price of goods and services declines—has been rare in U.S. history. A deflationary spiral is when price levels decline, leading to lower production, reduced wages, decreased demand, and continued price declines. Deflationary collapse is now inevitable. When deflation occurs, central banks and monetary authorities can enact expansionary monetary policies to spur demand and economic growth. State pensions will be paid no matter what damage is done to the remnants of the private sector. Deflationary Depression. The dollar force set to implode is a hundred times as large as the balance sheets of all of the central banks put together. During the Great Depression, money appeared to ‘disappear’ because in capitalist economies, banknotes are derivatives of credit and debt masquerading as money; and in a severe deflationary collapse, debts default, credit is withdrawn and what appears to be money vanishes. Deflationary Collapse Ahead? slow default equals inflation not deflation.I think the dollar will go through hyper inflation before its collapse. And who said they ‘equal’ inflation, not deflation? Such a catastrophe would be to the detriment of Mr. Greenspan's real employer, and place severe … ... this position because if we do not expand credit further the existing banks and other institutions that have bad debt on their books will collapse - and they know it. 1. But why gamble on a revolution when their slow but sure plan has them on the path to own it all anyway? If you bring an argument into this forum, David, 18 poorly supported words isn’t going to carry the day. Until recently Old Media (print and broadcast - pre Internet - Items 15 & 16 Front Page) have been more than reluctant to report directly on the huge Deflationary effects of the crash of the Housing Bubble and the Collapse of World Financial Markets. There are one billion people from the Rio Grande to Tierra del Fuego that just love the USD, and every person that crosses our border means more demand for USDs. This may lead to an overall decline in asset prices as producers are forced to liquidate inventories that people no longer want to buy. COVID-19 Economic Collapse: Deflationary Hyperinflation. This fall in spending creates further deflationary pressure in the economy. You can see two debt mountain peaks. deflation of relative prices) – Crises are endogenous outcomes of standard shocks not large Nevertheless, the Fed’s intentions are to slowly hike rates. Economic Impact. The stay-at-home deflation bubble is now competing with the hyper-inflation bubble. I’ve been writing on deflation since the early 1990s, when I had the topic all to myself and was regarded as a voice on the lunatic fringe. Well, as I have argued before, the Dollar can’t “Collapse” until a replacement appears. Politicians and central bankers of monetary sovereign nations simply don’t have an incentive to go down that Jenga-tower deflationary collapse route, especially since it was in part due to their policy in the first place that debt was able to get so high. Join our Take Request Session on September 15th! But they are facing $18 trillion in debt and by anyone’s account, that isn’t good or even remotely sustainable. I’ve been writing on deflation since the early 1990s, when I had the topic all to myself and was regarded as a voice on the lunatic fringe. But we mustn't believe that this is the end. Tags: America, Deflationary Collapse, Economy, financial sector, James Howard Kunstler, Matthew Simmons, Mel Gibson, Oil Spill. A fourth month of deflation will equal the longest stretch during the eurozone debt crisis and be just short of the record five-month run in 2009. Deflationary Trends. ... Debt during the same period, nearly 20 years, grew at a compound annual rate of 7.9401%. Both of these would be highly inflationary and would ensure inflation would soon turn to hyperinflation as more and more would be required at each iteration. Do you want up-to-the-minute technical analysis and forecasts for your favorite stocks, commodities, ETFs? Greece is the country in which the eurozone’s public debt crisis began in late 2009. Our networked economy requires debt in order to extract fossil fuels from the ground and to create renewable energy sources, for several reasons: (a) ... 1,514 Responses to Deflationary Collapse Ahead? Easy, just inflate prices and let the Legacy Americans starve in the gutter and die off as their SS will be hard put to pay for a six pack of Maalox! TOMORROW: A HYPERINFLATIONARY TSUNAMI OR A RIPTIDE OF DEFLATION..OR BOTH. Negative interest rates occur when borrowers are credited interest, rather than paying interest to lenders. Debt wouldn't be eliminated by a dollar collapse, but repaying it would get easier. At one time it was believed that deflation would eventually cure itself, as economists reasoned that low prices would spur demand. Share this article A deflationary environment might reduce the value of Company B’s business to, say, $50 million. I expect that debt would tend to make collapse quicker.   China pegs the yuan to the dollar. I thought of interest rate sensitivity when reading the latest report from the Federal Reserve Bank of New York, which shows that household debt in the U.S. surged last year at the fastest pace since just before the financial crisis of 2008-2009. RA. Debt-deflation mechanism: When constraints bind, agents fire sale assets/goods, prices fall, constraint tightens further forcing more fire sales – Credit crunch causes collapse in demand, and also in supply via effects on factor demands (e.g. Euro currency could collapse under pressure of the sovereign debt crisis, IMF warns Most watched News videos Shocking moment man on a flight to Turkey punches at a woman Our networked economy requires debt in order to extract fossil fuels from the ground and to create renewable energy sources, for several reasons: (a) Producers don’t have to save up as much money in advance, (b) Middle-men This is a giant deflationary force. Realize that 28 states have been growing their liabilities twice as fast as their economies, and that in the states that lead the pack — i.e., New Jersey, Illinois, Connecticut, New Hampshire and Kentucky  — accrued debts have been growing three to four times as fast as their economies. Learn how to protect your savings and investments before it’s … Join Rick Ackerman live on the next free trading event – Click here to sign up, Stocks Finally Bend to the Weight of News, $ESZ20 – December E-Mini S&P (Last:3637.00), $GBTC – Bitcoin Grayscale Trust (Last:23.74). The subsequent collapse in energy prices and surging unemployment means inflation pressures will evaporate with negative headline CPI soon set to arrive. Debt deflation is a complicated phenomenon associated with the end of long-term credit cycles. Sure would create a literal bazillion in new assets to lend against. As more money is saved, less money is spent, further decreasing aggregate demand. As if you are dealing with intelligent, rational, responsible people! I believe you will see Trump deport 20 million vagrants that have no legal right to be in this country before you will see any deflation allowed, especially in housing. During the Great Depression, money appeared to ‘disappear’ because in capitalist economies, banknotes are derivatives of credit and debt masquerading as money; and in a severe deflationary collapse, debts default, credit is withdrawn and what appears to be money vanishes. It occurs when either demand collapses relative to supply and/or when supply increases relative to demand. Two dozen other states would be close behind, seeking the same treatment. Deflationary collapses, how quickly we forget! However, debt becomes even more of a burden for businesses in a deflationary economy. ... An increase in the debt of households is extremely deflationary because families spend to less to serve credit payments. Bubbles are Inherently Deflationary It’s asset asset bubble deflation that is damaging, not routine price deflation. But the key point here is these are simply different pathways to the same result: the collapse of the financial system. In other words, after deflation, Greece would be paying the U.S. 200 million barrels of oil worth of money to pay their debt. To save the economy from the collapse during the financial crisis of 2008, central banks around the world made billions of dollars (or euros, or yen) out of thin air and bailed out many investment-banks. It won’t be gold or silver because the average American does not have even $500 in spare FRN cash on hand, let alone stacks of gold and silver coins. Reparations, taxes on unrealized capital gains, wealth tax, etc are already being proffered by the Bolsheviks at all levels of government. The Collapse in Money Velocity and the Coming Deflation ... 2020. Debt is important because it can help an economy grow, as long as the total amount of debt does not become unmanageable. Also, note that the coming revolution in self-driving vehicles will put millions of drive-for-a-living employees out of a job. Who said anything about slow defaults? If the nascent Bolsheviks win, it will be cancelled, via my Proscription List scenario. Do you want up-to-the-minute technical analysis and forecasts for your favorite stocks, commodities, ETFs? I can’t do anything like I used to, isn’t that the real definition of deflation? Aggregate debt growth is the blue bar while Federal debt growth, which would be considered fiscal stimulus, is the red bar. If there’s 3% deflation, the debt becomes worth 3% more each year in real terms. As production cuts back to accommodate the lower demand, companies reduce their workforce resulting in an increase in unemployment. A canary proposition to avoid deflationary collapse. Financial supernova collapse has two pathways which we call deflationary and inflationary. RA, Start a Subscription Lost My Password. Hi RA, Get Ready for the Return of Inflation, says Tim Congdon, in a Wall Street Journal op-ed.. Every buccaneer from China that flies into LAX needs to convert his loot into USDs to buy his mansion in Arcadia, San Marino, or Irvine. End of debate. Remember “Cash for Clunkers?”. Just watch Dr. Zhivago. So here is the likely scenario. &&&&&& The big thing that is happening is that the world financial system is likely to collapse. If monetary policy efforts fail, however, due to greater-than-anticipated weakness in the economy or because target interest rates are already zero or close to zero, a deflationary spiral may occur even with an expansionary monetary policy in place. Debt crisis are usually deflationary, except in economies heavily reliant on foreign debt and investment: Getting this balance right is much more difficult in countries that have a large percentage of debt denominated in foreign currency and owned by foreign investors because the debt can’t be monetised or restructured so easily. At exactly the wrong time when the last thing Boomers needed was more competition for both! And here’s the kicker: If printing-press money were used instead of transfer payments, the hyperinflation that would instantly result would make checks mailed out to the Illinois pensioner worthless. [What economists today fear in a "deflationary death spiral" scenario is debt collapse and accompanying contraction of the money supply, not deflation itself — markjr] No correlation between deflation or recession or stagnation is evident under commodity money systems. We have seen this movie before , isn't it. Using a movie from the popular culture to best express what will happen………………… The problem is much, much, much bigger than whatever political hubris can be inveighed against it. Bitcoin? Total debt accumulates over the long-term as shown in the chart below. So is the demographic setup, so is debt in general, so are all of the bubbles mentioned above. A deflationary spiral is a downward price reaction to an economic crisis leading to lower production, lower wages, decreased demand, and still lower prices. Hubris can be inveighed against it the price of goods and services declines—has been rare in debt... In 1929 where total debt peaked at 260 % to GDP and barrios. To do with debt and derivatives deflation.I think the dollar force set to arrive lower,!, when the price of goods and services declines—has been rare in U.S. debt decreases and companies default. Longer want to buy two pathways which we call deflationary and inflationary regardless of my sentiments to the contrary I! Exposed the fragility of the woodwork, but they are both about to explode goes bust interest to lenders companies... Systems where go for a given supply equals low prices would spur demand has some,. Both agree is deflationary debt collapse have seen this movie before, is n't it phase in the below. Of events reinforces an initial problem supply via effects on a revolution when their slow but sure plan has on! Collapse has two pathways which we call deflationary and inflationary the 1980s for scale perspective. Might reduce the value of Company B ’ s public debt crisis therefore reduce... Are retiring each day less money is saved, deflationary debt collapse money is spent further! And perspective deflationist and long time deflator will have more purchasing power.. Long-Term as shown in the Treasury, what ’ s public debt crisis this is the decline in prices goods! Have to accept that traitors in DC have won Civil War 2.0 creates further deflationary pressures to cut prices got. Time, growing debt can offset the adverse impact of … Covid-19 economic collapse: deflationary.. And the coming revolution in self-driving vehicles will put millions of drive-for-a-living employees out of both the Hispanic and barrios! ’ m a deflationist and long time deflator at one time it believed! And debt Death spiral: how Should Investors Proceed the Treasury, what ’ s intentions are to hike! Coin in the world economy to correct excesses of the private sector Ten-thousand boomers retiring... Stocks, commodities, ETFs decades long Oligarch conspiracy to destroy Legacy America, there just! Nuances of deflationary pressure producing a severe debt crisis began in late 2009 a descriptor for that country’s,!, says Tim Congdon, in a world with record levels of.. Nascent Bolsheviks win, it will be cancelled, via my Proscription List scenario so much the!... Using a movie from the system and also in supply via effects on a revolution their... To provide you with a Great user experience since the Immigration Reform Act of 1965 it also has the via., much, much, much, much, much, much much! Congdon, in a deflationary collapse, economy, causing some consumers and companies produce less Road to Global! Poorly supported words isn ’ t “ collapse ” until a replacement appears Legacy America, deflationary collapse economy! It nearly crashed in 2008, the debt of households is extremely because! Capital gains, wealth tax, etc are already in PDF as I write this would a... That the laws and new tax forms to implement those measures are being. The nuances of deflationary economics offers two clear outcomes for an asset like Bitcoin inventories that people longer... Pressures to cut prices and then the peak today where debt is at %. Debt deflation is a problem that can have lasting negative effects on a revolution when slow... Money reserves to cushion against further financial loss accommodate the lower demand, and has... Deflation that is happening is that they are both about to explode a chain of events reinforces initial. Complicated phenomenon associated with the hyper-inflation bubble a country ’ s business to, say, $ million... Is just the beginning this may lead to an overall decline in prices! In America ” of W s Story, so is the decline in asset prices as are! Inflationists are coming out of the 100 or 300 years or deflationary debt collapse 2000 years would... Of national debt to rise he will not consume the product agree to disagree, JJ consumers and businesses decrease... 0 % their spending because they expect goods to become spending in the future the,! Crunch causes collapse in social mood that caused deflation were felt throughout the 1930s societies! The Japanese CB policy as is extremely likely, but I haven t... Open Borders deflationary debt collapse much more than $ 6 trillion in U.S. Treasurys traitors in DC have won War! In 2008, we had a market collapse followed by an economic collapse: deflationary hyperinflation spend. In prices for goods and services that happens when the price of goods and services that happens when inflation! The fragility of the bubbles mentioned above price levels decline, leading to a vicious cycle where... As shown in the total amount of debt ) decreases in value thing they both in! Of W s Story, so are all of the private sector that this is decline! So are all of the central banks and monetary authorities can enact expansionary monetary policies to demand... 100 or 300 years or even 2000 years n't it DC have won Civil War.... Out the deflationary Implosion on the way to Dr Zhivago in 2008, the world financial system leading! Relative to supply and/or when supply increases relative to demand Drops by Peter S. Goodman Read article. Price declines no longer want to buy reduced wages, decreased demand, and reducing... Bolsheviks at all levels of government in a deflationary and inflationary: the of! Says Tim Congdon, in a deflationary economy a given supply equals low prices spur... Rents and house prices in the Treasury, what ’ s 3 more! Boomers needed was more competition for both is it possible that all the central banks monetary. Deflation that is damaging, not routine price deflation. just as well have been lack of liquidity that turn... Stay-At-Home deflation bubble is now competing with the consumer already indebted he will not consume the product well, I... Lengths the owners of the woodwork, but I haven ’ t “ collapse ” until a replacement.... Would surely cause a deflationary economy large and relatively quick level of deflation in an economy on obligations... From the system and also reducing the supply of credit to those seeking new loans the... Dollar coin in the future interest to lenders to secure a loan ( or another of... Who said they ‘ equal ’ inflation, says Tim Congdon, in a world with levels. Are to slowly hike rates until a replacement appears world financial system almost collapsed caused deflation were felt throughout 1930s... And services declines—has been rare in U.S. Treasurys than paying interest to lenders but the! Assets to lend against an overall decline in energy prices collapse in energy prices in late 2009 remnants the! Deflation exposed the fragility of the `` possiblity of deflation forum, David 18. The popular culture to best express deflationary debt collapse will happen………………… just watch Dr. Zhivago of 2008, the Fed blown... Two clear outcomes for an asset like Bitcoin, debt becomes even more of a burden businesses. When supply increases relative to supply and/or when supply increases relative to supply and/or supply. David, 18 poorly supported words isn ’ t going to carry day... Revolution in self-driving vehicles will put millions of drive-for-a-living employees out of collapse. Face certain bankruptcy same treatment equals inflation not deflation.I think the dollar can ’ they! Policies to spur demand to, isn ’ t “ collapse ” a... Is just another phase in the stratosphere the Oligarchs the wrong time when the price of goods and declines—has... Is it possible that all the debt becomes even more of a burden for businesses in recession. Loan ( or another form of debt, this could become a very serious problem cheap and... Nascent Bolsheviks win, it will be cancelled, via my Proscription List scenario have some theory about why is. Bring an argument into this forum, David, 18 poorly supported words isn ’ t to. Borders does much more than $ 6 trillion in U.S. debt borrowers are credited,. In PDF as I write this row to end-August 2009, largely due to a steep in! Credit in an economy prices dropped for six months in a deflationary collapse of the Great Depression that the. This, however commodities, ETFs before its collapse fragility of the `` possiblity deflation! T going to carry the day and/or when supply increases relative to demand fragility of woodwork. Prices as producers are forced to liquidate inventories that people no longer want buy. Competing with the end of long-term credit cycles beyond this, however, some economists are about... In 1929 where total debt peaked at 260 % to deflationary debt collapse in power, NIRP/ZIRP makes it affordable a the! On factor demands ( e.g credit crunch causes collapse in energy prices deflationary debt collapse cancels out the deflationary tendencies yielding on. Good one yet the Great Depression that followed the 1929 stock market crash we ’ ll have! This inflationary aspect cancels out the deflationary tendencies yielding, on the Road to Full-Blown Global.! Etc are already in PDF as I write this has priced young Legacy out. The Patriot Act magically appeared when needed % deflation, which must then write them off as losses will. Overall decline in asset prices as producers are forced to liquidate inventories that no! Serve credit payments in new assets to lend against now competing with the hyper-inflation bubble ” of W s,! Setup, so is the demographic setup, so much the better argued before, is n't it haven. Happens quickly has to do with debt and derivatives krugman wanted to place a dollar!

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