Deflationary Economic Depression 2010, Ready Or Not Here It Comes!
Much has been written about the Great Depression and the present crisis. There is much that is similar and some that is not. The differences explain why events have unfolded differently. The similarities explain why the end will be the same.
Deflationary depressions occur after the collapse of large speculative bubbles. The collapse of the 1920s US stock market bubble, then the largest bubble in history, caused the Great Depression of the 1930s. The collapse of the far larger dot.com and US real estate bubbles will cause the next.
WAITING FOR THE OTHER SHOE TO DROP
A daisy chain of disaster
The present economic crisis is similar to that of a patient who has suffered a massive near-fatal heart attack. Presently surviving only because of constant care and unprecedented levels of medication, it is the unprecedented levels of medication that will ultimately cause the patient’s death.
The amount of monetary stimulus keeping the global economy afloat has never been greater. Two of the largest economies in the world, the US and Japan, now have interest rates close to zero and, along with the UK, are engaged in “quantitative easing”, a monetary phenomena akin to self abuse, i.e. self-stimulation.
Extreme measures of monetary stimulation via money printing are necessary to counteract the deflationary pressures set in motion by declining asset values against which massive amounts have been borrowed. But, in the end, creating money out of nothing will reduce the value of money to exactly that—nothing.
This is the path upon which governments and central bankers have embarked. Fraught with danger and pitfalls, it was not their first choice—it was their only choice—and the rising price of gold is a measure of how far on the path they have traveled. Just prior to the collapse of the dot.com bubble, gold was $300 per ounce. Today, it has exceeded $1200.
It is not a coincidence that as monetary debasement has reached unprecedented levels the price of gold has also reached unprecedented heights. As money printing has increased, so, too, has the transparency of its fraud.
Money printed in increasing quantities becomes increasingly worthless; and, gold, as an intrinsic store of value, reflects the accelerating debasement of money in its price.
Not all believe, however, that gold is a function of monetary debasement.
Source:The Market Oracle
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