Depression II

Most economists of the Austrian school of thought will tell you in no uncertain terms that the massive manipulation of our country's currency will end badly. You cannot inflate forever and hope that things work themselves out.

For examples of what happens, look at the Wiemer Republic of Germany in 1923 and Argentina in the 1990's. In Germany the inflation of the supply of money got so bad that it took a 4.62 million marcs to buy just one U.S. dollar. In fact the collapse of their currency resulted in the collapse of the German government and allowed Adolph Hitler to toke over.

In Argentina during the 1990's, the government printed so many pesos that inflation raged at over 5000% per year. Prices for things like food, gas, and rent changed daily in an effort to keep up with the falling value of the peso.

How do we get to depression from hyperinflation? Simple, once prices go into orbit, demand falls. People get laid off and demand falls further. Companies close due to lack of demand and demand falls further. It becomes a downward spiral that cannot be stopped. It must run its course.

There are those who will tell you that Roosevelt's New Deal brought the country out of depression. The reality is that his social engineering caused the depression to last longer because he created false demand in parts of the economy and he created jobs and paid employees with fiat money. This caused the correction to last much longer.

Now fast forward to today. When depression II hits things will be much worse. First demographics are vastly different than they were in 1930. In 1930 80% of the population was agrarian. Most people lived on farms. Family farms were handled down from generation to generation and so were fully paid for. There was very little personal debt, as banks did not normally lend to average folks. When the depression hit, you found many multi-generational homes and you found farmers producing food for their families.

Today less than 5% of all families live on farms. We have become an urban society. So where will the food come from? Grocery stores typically have about 3 days worth of food on their shelves on any given day. When distributors close and the big chains start closing stores how will urban folks obtain food. There are city dwellers that do not know where hamburger comes from.

The incidents in Las Vegas with the "swarming attacks" by roving gangs provides a chilling look at what cities will be like during depression II. People with no food will roam city streets taking whatever they can find. The next depression will be far worse than the last.

Do not listen to government officials who tell you that they can prevent a reoccurrence of the Great Depression by market and currency manipulation. I mean look at how well they responded to the gulf coast after Katrina.

The fact is the government has very few weapons left in their arsenal for fighting such an economic battle and further manipulations only delay and worsens the problem.

Another key point is that a great deal of our manufacturing capability has been moved offshore. We can no longer build many of the things we use in our lives. This means that when financial crisis hits we will be at the mercy of our foreign trading partners who will demand gold or silver for payment, not our worthless paper.

Chilling isn't it?