How is the Coming Global Depression Going to Really Impact Us? (Part I)

Ever since I began my unpaid sabbatical earlier last year (2009 - it didn't start out that way, but here we are), I have been reading and researching extensively about the state of the world economy. Initially it was a bit of an on-and-off affair, as I was busy pursuing other interests as well. But by end of August of '08 so many events were happening (or had happened) worldwide that I just could not resist delving more deeply and full time into the underlying causes of the developing crisis. I also began to research and contemplate what lay ahead, and how it would really affect us.


One of the biggest disappointments is going to be (and has been, in my opinion) the education system. The paper pushing jobs, for which the education system is producing en masse, are literally going to vanish. A lot more people will have to either get involved in producing real goods. Too many free lunches have been taken by too many people staring blankly and meaninglessly at computer screens in cube farms or shuffling paper around or doing bullshit bureaucratic stuff.
 
More later...

BrItish Banking System INSOLVENT (What a Surprise...)

In a reaffirmation of the fact that the MSM is pretty much ALWAYS the last one to know (or admit) the truth, here is a report from The Independent (heh) of UK that the British banking system is insolvent. What is does not say is that the entire Western banking system is not only "technically" but practically insolvent as well. Welcome to the brave new world of insolvency- brought to you by the Central Banks of the world. We can't get rid of them soon enough.

As an aside, blogger Mike Shedlock highlighted the above report on his blog, and that, apparently, "someone" was trying to hide it. Well, just to reinforce the fact that there is no "hiding" on the internet and also to let those who don't already know the true state of the British banking system, here it is (a snapshot of the page in case "someone" tries to hide it again):

2009 Begins With A Bang

And here we go again. Looks like 2009 is shaping up to be a great year.

120,087 job cuts announced by large corporations in just the first half of January. In addition to the 87,235 jobs listed in the accompanying chart, IBM is cutting 16,000 jobs, ConocoPhillips is cutting 1352, GE Capital is cutting 11,000, Pfizer is cutting 2400, AMD is cutting 1100 and Blue Cross Blue Shield of Michigan is cutting 1000 jobs to form a grand total of 120,087 jobs - and this is just the large corporations. Note that this does not include potential layoffs to be announced by Microsoft.

(Data courtesy of CNN and Mike Shedlock's Blog).

A Hyperinflation Scenario

The coming hyperinflation - pretty much baked into the cake right now, especially for the USA - can have many triggers and can proceed in many different ways. Here is a scenario proposed by a reader “Paul of Los Angeles” from Rick Ackerman's site, which is pretty realistic - and I think probably "the one". Although it ignores the perspective of foreign countries' "belief" in the USD (biggest of whom is China) and only focuses on US citizens, I think the analysis pretty much applies to all holders of the dollar (who are being robbed and pillaged right now). They all share the characteristic of having faith in the US and its government. And faith is a funny thing - it takes years and decades - even centuries - to build, but only a single instant to destroy. With the level of corruption endemic in present day US economic and political system, it's just a matter of time. And although no one knows exactly when this Hyperinflationary Armageddon will transpire, I think it will be sooner than most people imagine. Forget about the monetary base (which is, I might add, being increased at an exponential rate by the Fed right now) - the amount of currency needed to cause hyperinflation has already been printed and resides in various Central Banks throughout the world. Even if the US citizenry doesn't wake up, a sell-off by one of the major holders (China?) will do the job.

Here's the link to the article. I am also publishing the relevant section here:

“In the world of the fiat USD (and all others fiats), you need to distinguish between the numerical destruction of fiat wealth (a mathematical event now happening), and the destruction of BELIEF in the value of the fiat USD itself (a moral/perceptual event that is still in the future). These are two completely different destructive events (mathematical and moral/perceptual), and one has not happened yet.

“At first, the mathematical destruction of vast amounts of fiat wealth clearly makes the remaining fiat units more valuable (law of scarcity), and price deflation results. Your argument for years of monetary deflation is only based in mathematics. Very scary mathematics, but still, only numbers. You need to go further.

“The fiat USD (a debt instrument) ONLY has value in the first place due to a belief that it has value. This belief was ORIGINALLY (as in 1933) founded in trust and discipline. People trusted that debts would be repaid, and that the FED would exercise discipline in the creation of the USD. These two conditions are NECESSARY if the USD is to continue to retain “value.”

“It has now been four generations since the USD went fiat, and massive brainwashing and stupefaction of the general population has been perpetrated. The belief that the USD has value is now simply an ingrained habit. As evidence, I present the President-elect’s pronouncement that we can basically IGNORE a decade of annual trillion dollar deficits, in order to “stimulate” the economy away from collapse. In the face of this insanity, zero MSM alarm bells are sounding. Even two generations ago (the Reagan / Volcker era), people would be running for the hills if this level of monetary debauchery and incompetence were taking place in the United States. So, for the time being, the brainwashed illusion of USD value remains imbedded and stable in the collective USA mind.

“However, regardless of what people have been trained to habitually believe, debt is still the actual “backing” of our fiat currency, and people are generally either unable and/or too fearful to assume more debt right now (the fatal flaw of the New Deal). Therefore, the “backing” of our fiat currency is failing, and worldwide organized trade and commerce (in the words of Jim Willie) is disintegrating. Eventually (months or a couple years), shortages of basic goods and services will surface somewhere in a “first world” nation not accustomed to scarcity. Relative valuations will change. For example, a luxury Mercedes vehicle will be deemed less valuable, and a gallon of gas in a moped, or=2 0a loaf of bread in your shopping bag, will be deemed more valuable. Lots of fiat money formerly committed to large, expensive non-essentials, will flow towards essential goods that are in shortage, due to speculation, hoarding, and/or the ongoing breakdown of commerce. Money velocity will increase. Even housing prices will be less important, due to the relative ease of squatting in a vacant residence if necessary. (To answer your question, who cares if the median house price is $100,000 or $10,000,000, if a gallon of gas is $50?) Prices will skyrocket for essentials, and suddenly, the trained and habitual “belief” in the “value” of the USD will evaporate. Deflation will flip over to hyperinflation in the blink of an eye.

“To wax spiritual, in the Book of Revelation the “mark” of the beast is the collective delusional belief in the value of a piece of paper. The Apostle John saw that people could not buy or sell without it, and souls were sold and traded for it. And in the end, the wealth of the Whore ends up being destroyed “in one hour.” This is how I see hyperinflation. It is a collapse in a belief system, and not just a mathematical event. We have already seen how leveraged speculative hedging and Frankenstein-like financial instruments (both only possible in a fiat money world), can result in very fast fiat wealth destruction. Do not, therefore, discount the profound impact of people simply losing faith in an ingrained habit.”

Tent Cities in Superpower Nation

Thanks to the brilliant monetary policy management of the Fed, a once great nation is in the process of being blown to smithereens. Tent Cities (what are more commonly known as "slums") are cropping up in many locations across the United States. The policies pursued by the US, intended to exploit other nations instead of increasing her own productivity - a "free lunch" at the expense of other nations, especially poor ones - have come full circle to haunt itself. It seems like American citizens are not going to be spared the consequences of the actions of their government. I take no joy in the current misfortune in which many Americans find themselves today, but they only have their own government to blame. Like they say, "As you sow, so shall you reap". Welcome to the Third World America. Never think it can't happen to you.



And another.

Central Banking Explained

This is a piece by an Australian TV show Newstopia doing a spoof on the RBA (Reserve Bank of Australia). This would be really funny, only if it were not true. But, sadly, this is what central bankers today are doing upon whom we are all (including the governments) relying so much to "save" the economy. The words spoken at the end are entirely correct - all fiat currencies today, completely delinked from Gold since 1971, are essentially worthless pieces of paper.

Detroit - Coming Soon To Everytown, USA

Detroit, once the hub of Industrial America, is now in shambles. The average home price has fallen in the neighborhood of $18,000. Yes, that's $18000. It's so bad, prisoners don't wanna leave prison. Crime has fallen because, get this, there NOTHING left to rob. Unemployment is 21% and rising. An example, if there ever was one, of what the regime of fiat currency can do to the real economy. Many more cities in America are awaiting a similar fate, if not worse, during the coming/ongoing Greater Depression. Shocking, but true.

Here's one.

And here's another:



This is NOT what a "superpower" nation looks like.