Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Deflation, Debt and Gravity

Economics / Deflation Aug 06, 2015 - 02:22 PM GMT

By: Raul_I_Meijer

Economics

Far too many people have already used lines like “We Are All Greeks Now” for the words to hold on to much if any meaning by now. But it’s still a very accurate description of what awaits us all. Just not for the same reasons most who used it, did.

No, I don’t really want to talk about Greece again. I want to talk about where you live. And about how similar the two will be not too long from now. How Greece is holding up a lesson and a big red flashing warning sign for all of us.

Greece is the mold upon which all of our futures will be based. Quite literally. Greece is a test tube baby rat.


Greece will never “recover” to our North American and Western European economic levels (if ever they were there). Instead, it’s us who will descend, “uncover” so to speak, to the levels Greece is at today. That is baked into the cake, that is inevitable, and that is therefore what we need to be ready for.

If we wake up in time to this new reality, we may, and that’s still only may, be able to prevent the worst, prevent something akin to the same punitive measures the Troika has unleashed upon Greek society, fully wrecking it in the process, its healthcare system, the safety nets for its most needy.

We may find a way to make a smoother transition from here to there if we prepare in time. But that’s the best we can do. As societies, that is; individual fates will vary.

Greece will find ways to do better than it does right now, balance things out, but it won’t be through a recovery or a bailout. Athens will -because it must, lest the humanitarian crisis deepens profoundly- find ways to better -fairer- apportion what means are at its disposition, amongst its people.

We all have to do the same, wherever we are. Our advantage today is that we can do this from a relatively well-to-do starting point. Our disadvantage is that, unlike the Greeks, we do not understand the reality we’re in.

We’re ignorant, we deny, we prefer not to think about it. The Greeks used to be like that, but they no longer have that choice. And we won’t for much longer either.

The reason why Greece is where it is today, and why we will all be there tomorrow, we can by now for good reason call ‘deceptively simple’. That is to say, the global banking system that orchestrated the financial crisis refuses to take the losses on its extravagant bets, and it has the political clout to get its way, all the way. That’s all you need to know.

The losses are therefore unloaded upon the citizens of our respective nations. But the losses are far too massive for those citizens to bear. They, or rather we, will see our societies stripped of most things, most of the social fabric, that hold them together. Any service that costs money will be cut, progressively, until there’s very little left.

It happened in Greece, and it will happen all over the world. Mind you, this is nothing new; third world nations have undergone the same treatment for decades, if not forever. Disaster capitalism wasn’t born yesterday. What’s new is that it now takes place in the supposedly well-off part of the world, in this case the European Union. And it will spread.

The successive Greek bailouts that have now ruined the entire nation were “needed” to stem the losses on wagers, derivatives and other, incurred by global banks, French, Dutch, German, Wall Street, the City. The first bailout in 2010 also served the purpose of allowing the banks time to shift away from their exposure to Greek debt.

All bailouts, be they directly for banks, or indirectly through a country like Greece and then for the banks, have been set up according to the exact same MO. Greece’s economic reserves just happened to be a bit tighter, and moreover, the country was a convenient lab rat and scarecrow to prevent others from protesting the bailout system too loudly.

The whole system of bailouts, be it in Greece or in the US, was never anything else than a transfer of public money to private interests, with the express aim of making good on the lost wagers of that private sector. With impunity, no less.

And no, the losses have not disappeared. Nor have they been written down. They have instead been transferred to fester in dark vaults, hidden behind swaps and other derivatives, and on central bank balance sheets. But that won’t last either.

The Automatic Earth has warned of the imminent deleveraging and deflation for years, and now everyone is talking about deflation. No worries, guys. As you were. But do please try and understand how this works.

There’s all these losses, with no-one prepared to write down any of them (see Germany vs Greece), and the elites behind the banks unwilling to absorb any -the elites instead insist on getting richer even in a depression-. There is only one outcome left then: that you and me will have to become much poorer. They are our losses now.

The only way the rich can keep getting richer is if the rest of us keep getting poorer. Economic growth is a thing of the past. Deleveraging has started for real. Huge amounts of zombified ‘money’ are disappearing as we speak.

That leaves the world with a lot less wealth. And still the rich seek to get richer, and they are in charge. The math is simple. As Greece shows us, the rich have no qualms about throwing an entire society off the cliff.

A large part of what is now considered wealth is made up of QE and related and inflated stocks, bonds and real estate prices, all of which is zombie wealth. Which can disappear overnight. And if it can, it will.

China stocks and “real” estate and local government debt to shadow banks, emerging markets, commodity currencies (Australia, New Zealand, Canada etc.), if you overlook that whole panorama it’s hard to see how you could possibly think there’ll be some kind of recovery.

Where should it come from? Overall debts are much worse, much higher, now, then they were in 2008. We haven’t had a recovery, we’ve had an “uncovery”. And we’re headed for a discovery.

The entire idea, the phantom ghost, of a functioning market died, if you were willing to look, with the advent of central bank intervention. People who work in finance, obviously and for understandable reasons, have never been willing to take that look. They’re just looking to make more money even if things tumble down the mountain in a handbasket. They call it “opportunity”.

But they haven’t been actual investors in years. They’ve just helped the banking system put you into deeper doodoo. Greece shows us where that leads. And soon, wherever you live will show that to you too.

Deflation is a *****. Nicole Foss here at the Automatic Earth has used the phrase “multiple claims to underlying real wealth”, for a long time. It’s like playing musical chairs. And you’re not winning. You never had a chance.

The only people who will wind up winning are the rich trying to get richer. The rest of us will soon live like the Greeks, and that’s if we are lucky.

There is no other possibility. “Money” is vanishing fast, and the only way it can even seem to return is if central banks do more QE, but that’s a dead in the water policy. Economic growth across the globe, and certainly in the west, is an illusion.

China was the last place that briefly seemed to have any, and they screwed up just like us, ending up with far too much debt to ever repay.

There is a point when the can gets so big and heavy, no-one can kick it down any road anymore. Not even one that plunges down a mountain. Something to do with gravity.

By Raul Ilargi Meijer
Website: http://theautomaticearth.com (provides unique analysis of economics, finance, politics and social dynamics in the context of Complexity Theory)© 2015 Copyright Raul I Meijer - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Raul Ilargi Meijer Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in