The domino effect when credit bubbles go to extremes:
Recession or Depression?
People would like the crisis to be over. Many are counting on it. But the market doesn’t give any uplift. People do not get what they want or what they expect from the markets; they get what they deserve. Yet there is a quarter century’s worth of mistakes, bad investments, business failures, and non-paying individuals. When so many mistakes have to be corrected, it is called recession, and when an entire economy goes bad, as is happening at present, it is called depression.
Today’s economic model has caused more mistakes than ever before. It has encouraged people to spend, borrow, and speculate. And each time the market tried to make some corrections, central bankers came along with more printed money and easier credit. Businesses that should have gone bust years ago kept digging themselves even deeper into debt. Homeowners kept running up more debt too. And speculators kept taking bigger and bigger gambles. The bubble in the financial sector – including subprime debt, housing prices, Wall Street bonuses, and derivatives – blew up in 2007/8.
“The force of a correction is equal and opposite to the deception that preceded it.”
The misconceptions and absurdities of the 2008 bubble époque were monstrous. Accordingly, the correction has been huge. World stock markets were nearly cut in half post-2008. Property prices too, have been knocked down almost universally. The total loss of nominal wealth is estimated at $50 trillion.
Could these losses have been prevented? Certainly, many of them could have, if authorities would not have distorted the mortgage market as much as they did.
And if they hadn’t created the Federal Reserve and Central Banks, then it couldn’t have provided ready money for so many speculators and borrowers. And if the Fed, under Alan Greenspan, had done what it was supposed to do – “taken away the punch bowl” before the party got out of control – the bubble in the financial sector probably would have been far more modest. In this fallacious environment, people drew all the wrong conclusions. They thought, “Capitalism has failed.” They saw the economy going downhill – but didn’t notice how government had distorted the monetary system. Instead of warning investors of the dangers ahead, they lowered the lending rates, to turn a bad situation into worse.
Whoever was responsible for the mistakes, capitalism went about correcting them with its customary élan. It hit imprudent investors with trillions in losses. It knocked down mismanaged corporations. It wrecked homeowners – and pounded housing-based derivatives to dust.
Capitalism operates by a process that the economist Joseph Schumpeter called “creative destruction.” It destroys mistakes to make room for fresh innovations and new businesses. Unfortunately, this puts capitalism at odds with governments and at the same time, with what most people want. When people make mistakes, they maintain that they are blameless. “Who could have seen this crisis coming?” they ask. And say, “Some-one else should pay for the loss.” Today, the central banksters; “…who mismanaged their regulatory responsibilities during the bubble époque, bailed-out mismanaged corporations to protect lenders who mismanaged their money.”
They are determined to prevent capitalism from making major changes – in the worst possible way. What’s the worst possible way? Quite simple. Leave the failed-managers in place. Keep the brain-dead companies alive – along with the zombie banks. Let the government take ownership of major sectors of the economy. And saddle a debt-ridden society up with even more debt! As the communist Fidel Castro once said:
“My idea, as the whole world knows, is that the capitalist system now doesn’t work, neither for the United States, nor the world, driving it from crisis to crisis, which become each time more serious.”
The Concealed Robbery:
The US-government is expected to borrow $2 trillion a year alone. From whom? As explained in a previous essay; By printing money that has to come from the value of the existing currency – from money earned and saved by the people – in other words, siphoned off or stolen out of the value of the old money. People who had saved their hard earned money have lost part of their purchasing power – at least theoretically. They surely never agreed to allow their money to become debased. Even worse, they never knew what was happening with their money. So, who will repay it? Nobody.
The more central bankers try to delay and divert the process of ‘creative destruction’, the longer it takes to achieve a recovery, and the higher the eventual cost.
“The severity of a depression is inversely correlated
with government’s efforts to stop it.”
Delaying corrections halts necessary changes:
When Japan was confronted with a major correction in 1990, its politicians desperately tried to stop the correction. Politicians could not make bad debts disappear, or turn bad decisions into good ones. All they could do was to delay the necessary corrections – and cause new mistakes! Over the years, an amount equivalent to almost an entire year’s output has been spent on recovery efforts. But all they did was to prevent and forestall the needed changes. Now, 28 years later, the Japanese economy is still in a corrective mode – still fighting deflation. The latest economic numbers show that Japan’s economy has shrunk at an annualised 1.6% in the July to September quarter. This means Japan is officially in recession and Abenomics has proved to be a total failure. In fact, Abenomics has been nothing more than wholesale looting of Japan’s pensions and other financial assets, aimed at supporting the cabal in the US.
The Worst is still to come:
Is that the end of the story? Not at all. The Central Bankers’ efforts to stop the progress of capitalism will have some spectacular consequences. The collapse will start when the bond market implodes, sending yields through the roof, for nations addicted to debt, a credit crisis cannot be sustained for long.
Destructive help comes from all over in the western world, turning a bad economy into one that is even grimmer, the EU started, on behalf of the USA, a war in the Ukraine, for which EU taxpayers pay the bill.
Inexcusably, sanctions were applied on Russia to ensure the EU’s medium-sized enterprises suffered severely. Resulting in unnecessary business bankruptcies, less employment, more people on the dole, less taxable income, lower or negative GDP, etc.
Are governments stupid, or do they do this deliberately? Presumably they are instructed to do this on purpose, as they don’t want this crisis to be solved. As described in a previous essay, we know all this from Dr Richard Day, who outlined this in full at a meeting in 1969 that long-established communities would be destroyed through an economic crisis, mass unemployment, and mass immigration.
Russian sanctions are hurting the EU:
EU citizens are very upset to be pressured by the US, that essentially commissioned the EU, “Let’s have a fight between the EU and Russia.”
Germany has always been turned towards Russia, all the way. Germany is pro-American, but has turned economically towards Russia. Actually the Germans always wanted to maintain their ties with Russia. But the US has a vested interest in starting a new Cold War. Which creates a lot of resentment with the people of the EU. Nevertheless, the EU capitulated. All this is happening because the EU is owned by the Rothschild Illuminati – they dictated to the EU to adopt and enforce sanctions, and NATO into military confrontation with Russia. They plainly state, “the sanctions must continue until Russia gives back Crimea,” which of course won’t happen.
It is the old ‘divide and conquer’ strategy over and again. The sanctions are hurting Europe, and ironically turn out to be a great benefit for Russia, because finally Russia realises: “We can’t depend on other countries to supply our basic imports, we have to rebuild our own industry.” So Russia loves the sanctions, Europe is suffering and the Americans are finding that the Europeans are suddenly angrier at them than they are at Russia.
The EU has fallen right into Putin’s hands, as the EU is reliant on Russian natural gas and oil – a third of its fuel comes through Putin’s pipelines. He can bend the EU to his will, simply by turning off the valve. No need for military intervention. Crimea and the eastern Ukraine, with their oil and gas reserves in the Black Sea, are his. Putin controls the world’s most vital energy resources. He’s turned Russia into the go-to source for countries desperate to secure long-term supplies of energy. A Uranium shortage is coming too. So, Putin is preparing to turn it into a cash register and make controlling in-the-ground resources a tool of geopolitics.
Germany and Japan are direct competitors in high-end manufacturing exports. Japan has taken steps to dramatically weaken its currency, a weaker currency means Japan’s manufactured products will be cheaper than Germany’s manufactured products. That means the German economy is going to take another blow as markets favour Japan’s cheaper manufactured products – even more so since the global economy is slowing down – now the ECB is FORCED to do what Japan did, to stimulate the moribund EU and weaken the euro to help make EU exports more competitive under the argument that we need more inflation. This includes the provision of additional loans to banks and the purchase of ‘certain types of debt’ which have a significant impact on the ECB’s balance sheet. Expect an increase that amounts up to EUR 1 trillion more than it is now.
The demographic reality:
But, the worst is still ahead of us – the western world will experience what the Japanese experienced when they saw their Baby Boom population peak 15 to 20 years ago – earlier than the Baby Boomer generation of the West.
Japan’s stock market, real estate, and their economy has declined for 14 years. It has continued to decline or falter in what is called a “coma economy” due to endless stimulus that doesn’t allow the debt bubble to re-balance and restructure.
To make matters worse, most of the EU countries experienced post-war Baby Booms of their own, and are undergoing similar generational shifts in spending, although the worst of this decline still lies ahead. This demographic reality has made this recession global in scope – and that could be the reason this recession is lasting longer than anyone anticipated. In fact, all the evidence points to the next phase being a depression as the great financial bubbles burst in concert more deeply and the enormous debts finally get restructured.
There’s another great bubble ready to burst too;
“China is ripe for a bubble bust, where government has been building cities designed for a million people, yet have zero inhabitants – they continue to build infrastructures they will not need for decades – they strive for excess industrial capacity – all to keep unemployment from soaring after their exports collapsed in 2008 and 2009.”
Deflation or Inflation:
The greatest credit bubble in modern history will continue to deleverage – and that means deflation, not inflation. This is what lies ahead. Inflation is on everyone’s mind these days. All of us are experiencing higher prices somewhere. But don’t be fooled. Deflation is a greater threat in the short term. And it’s crucial you understand this. Deflation, as the name suggests, is the exact opposite of inflation.
Inflation happens when there’s a strong demand for goods and services and a limited supply due to low productivity. When inflation falls due to a strong productivity like in the 1980s through to the 2000s, interest rates fall, credit is easily obtained and people and businesses borrow more and more. They over-expand and overspend. They also speculate increasingly and that causes bubbles in financial assets from stocks to real estate.
With deflation, the opposite occurs. There’s too much supply of goods and services due to over-expansion. There’s less money flowing because credit tightens up, causing money to become scarce. And because people have less money to spend, demand for goods and services go down. The aging of the Baby Boom generation will also cause demand to fall substantially. And when demand goes down, so do prices.
The domino effect when credit bubbles go to extremes:
Recapitulated, when credit bubbles go to extremes they always burst and deflate – resulting in a sudden tightening of the money supply (credit) – followed by deflation as massive amounts of debt are written off and financial wealth disappears as markets crash, which is in effect Schumpeter’s “creative destruction” at work, with the following chain of consequences:
- Less credit meaning less money in the economy.
- Less money meaning less demand for goods and services.
- Less demand meaning lower prices and less production.
- Less production meaning more closing of factories and more job losses.
It’s all a domino effect. For those who don’t prepare now, the impact will be devastating.
Gold is in a pretty unique position right now. In essence – except for market price manipulation – it has been disconnected from central bank interventions, even as the bond and stock markets kept charging ahead. The gold market has shed speculators that helped fuel massive price rises through 2011, and then fled to equities to chase gains.
Nevertheless, or perhaps thanks to extensive manipulations, the demand for gold is still strong, especially in Asia. Chinese gold demand rose sharply once the price fell under $1,200 an ounce. India, with its obscene restrictions on gold imports and purchases, saw a one-third increase in demand year-on-year. Even central banks are in on the game. Year-on-year purchases are up 28% for Q2 2014.
So, by buying gold and silver, you put yourself on a gold standard, and time will reveal to you the significance of your decision. The following view of the near future should be more than convincing.
Ron Paul – “The chaos that one day will ensue from our 40-year experiment with worldwide fiat money will require a return to money of real value. We will know that day is approaching when oil-producing countries demand gold, or its equivalent, for their oil rather than (petro) dollars or euros. The sooner the better.”
The petrodollar system:
In de early 70s, the Saudi governments and the US created the petrodollar system. Under this system, the US guaranteed the survival of the House of Saud by providing a total commitment to its political and military agendas. That agreement changed the world trade – without dollars, no access to the world’s most important commodity. In other words, it made the US a toll collector in any transaction that had nothing to do with the US, or US-made products or services – transforming the US into an increased powerhouse and creating a deeper, more liquid market for the dollar and Treasuries.
But now, geopolitics is rapidly changing. The U.S.’ failed strategic interventions in the M.E. with faltering protection for the House of Saud, the rise of Iran – which is not part of the petrodollar system -, Russia’s increasing power as an energy giant, and the emergence of the BRICS nations – which offer the potential of future alternative economic/security arrangements – all these affect the sustainability of the petrodollar system. Putin would like nothing more than to sabotage the petrodollar, and he’s forging alliances across the planet that he hopes will help him to achieve his goal.
At the same time, the relationship between the US and Saudi Arabia, has been deteriorating. The Saudis are furious at what they perceive to be the US not holding up its end of the petrodollar deal. They believe that as part of the US commitment to keep the region safe for the monarchy, the US should have attacked its regional rivals Syria and Iran by now. And they in turn may feel therefore, that they are no longer obliged to uphold their part of the deal, selling their oil only in US dollars.
The Saudis are already heavily involved with China and at the same time with Russia too. Oil traded in gold-backed roubles or Yuan is the result of all this; the death knell for the petrodollar.
Vladimir Putin is stripping America’s superpower status, by forging to break the monopoly of the dollar in the global energy trade. Which is going to affect the average citizen too and cost them dearly. The EU is for one third reliant on Russian natural gas and oil and is going to feel the pinch too. The writing is on the wall: the petrodollar is on life support, and Putin is able to pull the plug.
Along with China, Putin delivered another crushing blow to the US Dollar with the New Development Bank that invests in developing nations, and through a non-dollar international payment clearing system. Putin is using Russia’s vast energy and resource wealth as the ultimate economic weapon. No need for Cold War 2!
Moscow and Beijing have dealt another blow to the petrodollar by agreeing on a second mega deal – a western pipeline gas deal in addition to the previous eastern route of $400 billion. This deal has already been signed. And on the subject of oil deliveries, Putin said:
“We have built and put into operation an oil pipeline from Russia to China and concluded agreements providing for the increase in crude oil supplies.” And more: “Strengthening ties with China is a foreign policy priority of Russia. Today, our relations have reached the highest level of comprehensive equitable trust-based partnership and strategic interaction in their entire history. We are well aware that such collaboration is extremely important both for Russia and China.”
Headline in the FT: “The euro is in greater peril than ever.” The Eurozone has no mechanism to defend itself against a drawn-out depression. And it is getting even more bizarre; the European Central Bank now sets all banking standards throughout Europe, according to which a bank may fall or rise. This is a clear infringement on the Eurozone nations’ sovereignty. Executed on behalf of Wall Street, in other words, Rothschild Zionists, to undermine EU trade and investment with Russia and China.