A little research on the depression of 1929 will reveal that depressions are not started and ended in a few days or months. They take years to roll out to their fullness, and in that time the stock market rolls up an down giving the illusion things are getting better, when in actuality it is setting itself up for the final CRASH. Before anyone gets comfortable with the staged "recovery" be warned that the worst is yet to come to america.....
Are we in a depression?One expert says we're there, and another says a 'contained depression' will last a decade. Meanwhile, look out for hyperinflation.
Posted by Money Staff on Wednesday, August 25, 2010 1:46 PM
The U.S. is in a
1930s-style depression, say Gluskin Sheff economist David Rosenberg and other bad-news bears of today's economic malaise.
Rosenberg notes that the Great Depression also had its high points, with positive reports and even some healthy stock market gains.
But those signs, like the occasional bright spots of today, masked an ugly truth. Rosenberg calls current conditions "a depression, and not just some garden-variety recession."
"We may well be reliving history here," Rosenberg writes. "If you're keeping score, we have recorded four quarterly advances in real GDP, and the average is only 3%."
Mike Shedlock of SitkaPacific Capital Management, writing today for Seeking Alpha, takes a long look at an article from the Jerome Levy Forecasting Center discussing the concept of a "contained depression," which Levy defines as "a long period of substandard economic performance, chronic financial problems, and generally high unemployment" likely to last about 10 years.
While Shedlock disagrees with parts of the Levy article, he writes: "I like the concept of a 'contained depression.' We are certainly in a depression. However, 40 million people on food stamps as of August 2010 masks that depression. . . . For comparison purposes, there (were) just over 11 million on food stamps in 2005."
Shedlock continues through the Levy article, taking it apart point by point, finding some disagreement but ultimately conceding that its conclusions are basically on track.
"Assuming we stay on the same course, we are indeed headed for disaster," Shedlock writes. "However, timing the disaster and the nature of it is the problem. We could be five years away or 10. There are too many variables to figure out, and too many ways the problem can change in the meantime."
Also writing for Seeking Alpha, novelist and filmmaker Gonzalo Lira discusses how the current state of deflation amid global depression -- which he says "has squeezed both aggregate demand levels and aggregate asset prices as never before" -- will lead eventually to hyperinflation.
"Yields are low, unemployment up, CPI numbers are down," he writes. "In short, everything screams 'deflation.' Therefore, the notion of talking about hyperinflation now, in this current macro-economic environment, would seem, well, crazy. Right? Wrong: I would argue that the next step down in this world-historical Global Depression which we are experiencing will be hyperinflation."
Before you dismiss the idea, check out Lira's explanation of often-misunderstood hyperinflation. It's not, as some people believe, simply an outgrowth of inflation. It's a whole different animal.
"Inflation is when the economy overheats," he explains. "It's when an economy's consumables (labor and commodities) are so in demand because of economic growth, coupled with an expansionist credit environment, that the consumables rise in price. This forces all goods and services to rise in price as well, so that producers can keep up with costs. It is essentially a demand-driven phenomenon."
Hyperinflation, on the other hand, "is the loss of faith in the currency. Prices rise in a hyperinflationary environment just like in an inflationary environment, but they rise not because people want more money for their labor or for commodities but because people are trying to get out of the currency."
