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4 sure signs that deflation is here for years

thomas train deflation

Here’s a real unconventional idea. Have economic policy that allow for the wealth of the nation to be accessible to all who work. Instead of the present unidirectional movement of the nations wealth to the elite few. The more economic power that is being put into fewer and fewer hands does not serve the needs of anyone but those few. The present system ruins the spirit of innovation and entrepreneurship. The present system and its policies does not remotely represent anything like capitalism. It is killing it.

1. Fed borrowing (not printing) money

Basically, what the government is doing is increasing the money supply by devaluing it (printing more than it’s worth) and giving it to banks so that they can lend it. Then, when things pick up, simply take the money back and destroy it.

Why our currency isn’t devaluing is because we are comparing it to countries that are also employing this method of credit creation.

The $100 bill in your pocket really becomes worth $50 when they double the amount of currency out there without anything to back it (e.g. investors with resources), and the surplus is given to the already rich, since money travels down a pyramid from the government or resource maker to the consumer who consumes as a result of his/her labour (or profit maker to the consumer through secondary falls).

The net effect of Quantitative Easing is giving cash to the rich.

When the amount of currency dwindles as the government calls in purchased bonds, credit will be cruched again and we will look to investors to provide credit like they did before. Of course, they will not be so inclined to invest in a country in which this method was employed, and so with no money to flow down the pyramid, the average Joe is left with nothing. House prices fall, people will sell for whatever they can get, and eventually the value of the currency becomes next to nil.

Having many major currencies debased will provide ample opportunity for the IMF to step in with their Special Drawing Rights or a North American currency solution for the masses, so be prepared for this.

2. Very low interest rates

“Owners of capital will stimulate the working class to buy more and more expensive goods, houses and technology, pushing them to take more and more expensive credits until their debt becomes unbearable. The unpaid debt will lead to bankruptcy of banks, which will have to be nationalised and the State will have to take the road which will eventually lead to Communism.”

Karl Marx in Das Kapital in 1867.

Scary to think Marx had this figured out and public 142 years ago and no one paid any heed. The fact that democracy in the manner in which is recognized by western philosophy is actually the tool in which communism would be implemented and instituted has to be the epitome of irony.

It is shocking to think our great leaders have never read such a quote, or Marx’s Das Kapital at the least. Watching the events in the Middle East I would suggest they have also lacked the wisdom of reading and paying attention to other ancient literature as well, for example Sun Tzu The Art of War.

It is interesting that these leaders are supposed to have been educated in some of the best institutions and they are not privy to such information. It is not surprising considering the fact they also are unaware of the cost of bread and milk (Basic staples), but are trusted to lead the world’s economy … insulting really.

3. Retail prices falling

A significant decrease in consumer spending is needed to truly re-balance the economy. We’re still in the middle of a debt crisis and unless the debt-savings ratio decreases the economy will come down hard in the future. Stimulus money without strong foundations is like a person paying down their credit card debt by taking out more credit.

With the economy only limping along, Americans are once again being choosy at stores, many of them buying only at deep discounts because they can’t shake uncertainty about their jobs.

Retailers around the country posted a sales increase of just 2.8 percent for July over a year earlier — and at that time, the economy looked much bleaker than it does today.

The July figure, released Thursday by the International Council of Shopping Centers based on results from 31 chains, was the fourth straight month of weak retail numbers. For the most part, economists were disappointed.

Without more jobs, Americans are likely to remain cautious with their spending, restraining the economic rebound, they said. But without more spending, companies will likely be slow to hire.

“To break out of this, we need both employment and consumption to come up together,” said Nigel Gault, an economist at IHS Global Insight.

4. Real Estate prices falling

For those who haven’t been living under a rock for the past 3 to 4 years, you’ve probably noticed the housing collapse in the United States and around the world, but more pronounced in the latter because of the size of the economy and the size of inter connectivity of that economy with the rest of the world.

In terms of housing prices in Canada, this will come down soon. It is simple, since Canada does more than 80% of its trade with the U.S.. The Americans are loosing their jobs at a faster rate than Canada which will impact their buying of goods and services from Canada as well. This will put a strain on the manufacturing sector in Canada to reduce output. Then companies will start laying of people. These people will end up on the E.I. line in another year or so. After the E.I. runs out they will not be able to find jobs. People who saved for the rainy day will survive for another few months.

Also this same group of people will not be buying as many goods and services. This will put a further strain on the economy. Markets will react to the news and housing prices will come down another 8 to 12 percent.

So in one year or so, housing prices in Canada will definitely come down. Governments cannot use artificial means to prop up a capitalist economy especially on a massive scale.

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