rom VEDIC VILLAGE REVIEW #38 - FIJI (this is only a small part of his newsletter) WORLD DEFLATION AND THE GREATEST DEPRESSION From a lifetime of business and the amateur study of economics, and taking a special interest in the “credit crisis” since 2007, I am now confidently of the opinion that the world faces an immediate and unavoidable financial upheaval and deflationary collapse of credit. Everyone expects inflation, but if $50 trillion of central bank infusions into the system since 2008 has not yet produced inflation, WHAT WILL? The forces of deflation are overwhelming inflationary forces and have gotten the upper hand. We are not in a Weimar Republic scenario of printing actual paper money; the monetary expansion of today is largely an increase in electronic DEBT, not of paper money in circulation. This overall debt load can no longer be serviced, resulting in default, restructuring, liquidation, asset shedding, bankruptcy, and shortage of cash. Some things are still inflating, e.g. food, but if one looks closely, practically everything else, namely secondary stock indices, general commodities, foreign currencies, bonds, real estate (now even London & New York) - all have markedly declined in value. The 2007-09 episode was a warning that the end of hundreds of years of financial expansion has reached its ultimate sustainable limit. The lies of official statistics and central bank bluffing cannot remedy the underlying disease of over-borrowing from the future. The age of easy money and inflation is over; a new reality has arrived, and although I may be wrong, my two-cents of unsolicited advice is that devotees everywhere should do the following: 1) Eliminate secured debt as much as possible lest it cannot be serviced and there is default 2) Be prepared to withdraw your cash from the banks before they disallow or restrict this (I know a devotee who lost big-time with the Cyprus banking “bail-in”) 3) Precious metals are in a long-term downtrend & are most likely going MUCH LOWER, so don’t use metals as an inflation hedge when they are declining in dollar terms 4) Liquidate for cash all unnecessary possessions while there are still ready buyers 5) Take steps now towards self sufficiency, and have your options ready or in place Most everyone expects the death of the US dollar and gold/silver going to new heights. However, because two thirds of the world’s debt and contracts are in USD (a status that will not change quickly despite publicity about BRIC’s increasing avoidance of dollar use), as the pressure to salvage one’s assets increases by paying off debt to avoid default, demand for the USD will increase relentlessly. The USD is far above its lows of years ago and has clearly established its uptrend. The dollar is not dying yet, although in a few years, after a complete equalization of debt by deflation, then probably hyperinflation will follow due to actual massive cashnote printing. Precious metals are not going up, the economy is NOT improving, real estate languishes far below former highs, and most commodities are in downtrends. The theory of inflation is negated by what is actually occurring- it may seem counter-intuitive, that in the face of unprecedented credit expansion, still the economy is slowing and falling. At a certain point, further increase of debt CAUSES deflation instead of inflation, as defaults destroy existing debt faster than it can be created. It takes willing and capable lenders and borrowers to expand the economy, but when there is no will to lend (banks are just parking their funds) and no will to borrow (people cannot afford to), the debt pyramid collapses as defaults spread. The financial house of cards today can collapse within a few days, at best a few years. Life as we know it will cease to exist ! This discussion may seem a little off-topic for VVR, but if devotees lose everything, residence, income, and cannot access savings, it becomes difficult to spread Krishna consciousness due to being so inconvenienced ourselves. Please consider the deflation scenario carefully and hopefully this note of caution and steps to take will be useful to Prabhupada’s mission and his servants. Be prepared, be safe; times are dangerous, risk should be avoided. We should preserve what we have, not put it at risk in hopes of a continuation of the inflationary environment that has ended. Now cash is king, debt is a death-knell. To me it appears that the modern civilization is self-destructing- by war and an economic depression far worse that the 1930’s, lasting past our children’s lifetimes. The existing financial system is totally artificial and is an illusion only. The next major episode in the history of the world is a massive neutralization of debt. The godless snake is eating its own tail. My apologies if I am proved wrong.
Posted on: Mon, 06 Oct 2014 09:16:13 +0000
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