Are You Ready For An Inflationary Depression?

Tyler Durden's picture

Submitted by Tom Chatham via Project Chesapeake,

We are heading into a new depression. It is not coming. It is already here but we are only in the beginning so it may not be easy for many people to see just yet. Once it is easy to see it will be too late for any meaningful actions to mitigate the effects. Just as you must prepare for a tornado ahead of time, you must prepare for economic conditions early.

We have 20 trillion in debt, over 200 trillion in unfunded liabilities and over a quadrillion in derivatives held by the banks. Our GDP is only about 17 trillion a year and world GDP is only about 60 trillion. It does not take a math wiz to realize that even if we are not paying any interest at all on this massive debt, there is no way to ever pay it all back short of some type of default.

That is what depressions do. They wipe out all of the misallocation of resources and bad debt and provide a reset for the economy. These resets can be relatively easy or they can be very destructive depending on the amount of misallocation that is present in the system. The amount of debt, brought on by decades of unrestricted credit creation, is the largest in history. That means we are in for a very bad ride in the near future.

Much of the money that people think they have is really only made up of digits in some computer somewhere. The banking industry has already taken this money for its own use. To eliminate the need to ever give it back to the rightful owners they must destroy these digits. That is what the new bail-ins are all about. They can at some point just wipe all of those digits out of existence and say tough luck suckers.

The depression of the 1930’s was a deflationary one in nature. People lost their jobs, prices fell and cash was king. People holding bonds did very well. In an inflationary depression, prices rise, people will get paid in increasingly worthless paper and bonds will collapse. Banks will enact bail-ins to stay solvent and people will go broke while holding piles of cash.

In the end the inflationary depression will end with the currency collapsing and people losing everything they have that is not fully owned. Eventually we will see deflation as prices fall due to the destruction of the monetary system. At this point most people will be financially devastated. Those that make it to this point with their wealth in tact will be the new wealthy class.

So how can a person survive something like this? You simply need to focus on the needs of your family over this period of time. If you can provide the needs of your family regardless of the prices at the time, you will make it through the worst of times, This means you need a plan to provide these items to your family whether prices are rising or falling. If you have a years supply of food, it does not matter what the current price is, you will have the means to feed them.

If your home is paid for, your car is paid for and you have a supply of energy or a way to produce it yourself, it will not matter to you how fast prices are changing or how much money you bring home every week. You will be able to live outside of the rapidly changing economy. The rapid changes that will destroy others will only provide you a glancing blow.

Those that survive on credit will be devastated as their access to credit is cut off and they become unable to continue making payments on their possessions. They will be devastated even if they still have a paying job. For those that expect to survive on their savings and pensions, they will find those accounts empty following any bail-ins.

Where you live will also play a major role in how well you survive the depression. What do you think will happen when those dependent multi generational families lose their welfare and food stamps following the breakdown of the credit system and prices rise faster than benefits? The ability to produce some items yourself will also depend on your location and the ability to stay safe.

The whole of the production and distribution system depends on 30 day credit. When the credit system ceases to function, goods will stop being produced and transported. This will lead to high prices and few goods to buy. So even if you have a bag full of money you may not be able to buy what you want at some point.

Just like a tornado that tears through a community, a depression can leave the people without the resources they need unless they have them hidden away safely for future use following the event. This is why having resources, real physical goods, put away now will allow you to thrive when the system fails. When the system resets, you will not get a second chance to do it right. You only have one shot and that requires you to finalize your preparations now while you still can make a difference.

The whole point of preparing for this type of upheaval is to maintain a standard of living that you find acceptable. Lack of preparation in this type of event will likely find you living much poorer than you would like. If you are successful in maintaining your standard of living and preserving your wealth throughout this event you will have won the battle and set yourself up for a better future when things stabilize.

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Ballin D's picture

We've been living in it for close to a decade, I think we're ready by now

Croesus's picture

You bet your ass I'm ready...ready to shop 'til I drop.

"Buy when there's blood in the streets"...h/t King Jew

847328_3527's picture

probably Kia cars. Last two years then kaput.

NoDebt's picture

I am ready for anything.

I mean, until it actually happens, that is.  Then, like the great philosopher Mike Tyson said, a lot of people are going to find out that "everyone has a plan until they get punched in the face."

Making plans for the apocalypse is tricky business.  It depends on what kind of apocalypse you think is coming.  

I still think the only people who are taking a logical course of action are the full-on preppers.  Bunker, guns, ammo, supplies for months or years, making connections with like minded people who have necessary and helpful skills to keep you alive (you still need to have an inflamed appendix taken out if needed, even during the apocalypse).  And if it doesn't  get that bad, they're out a few bucks, have a little egg on their face and a slightly bizarre group of friends and contacts in their life.  No biggie.  But if it goes down anything like they have prepared for, they will have the best shot at making it through.

 

JamesBond's picture

Hold cash during deflation and hold things during inflation.

 

jb

Justin Case's picture

In an inflationary depression, prices rise, people will get paid in increasingly worthless paper and bonds will collapse. Banks will enact bail-ins to stay solvent and people will go broke while holding piles of cash.

post turtle saver's picture

so, aren't debts denominated in hyperinflated currency basically inflated away?

maybe I can pay off my mortgage with a loaf of bread, who knows...

Save_America1st's picture

I don't know what the fuck is going to happen...nobody does.  It's all too fucked up.  And since I ain't no billionaire, I can only prepare to best of my ability for as long as possible until the shit hits the fan.  That's all anybody can do if they have the ways and means and are awake enough to act on their common sensibilities.

So:  land, food, water, tools, guns, ammo, cash, skills, phyzz Ag and Au, clothing for whatever situation, 1st aid supplies, hunting, fishing, camping supplies, etc. etc. etc. etc. and whatever else any of you can think of.

All that gear...whether needed eventually or not in some way or another will never be worth nothing.  And if it outlives you for whatever reason it will be great to hand down to others if at all possible.

It's really all most of us can do, and it's the best thing going in these critical situations. 

Stuck on Zero's picture

In the last depression cities kept raising property taxes because they needed the cash. Pretty soon nearly everyone lost their property to the state. So, don't bank on property to get you through a depression.

Md4's picture

Relax.

I don't think it's possible to "gather" enough, and the effort is probably silly.

What?

How much?

For how long?

Quick reset?

Kidding...right?

There will be no quick reset. This is a total game changer, if it ever happens. And NO ONE, including me, has any idea what that means.

Security and needed skills will be your greatest need and asset.

Focus on those, and mobility. You'll be moving around a lot (at least for a time).

Lt. Colonel Moore urges Sergeant Major Plummley to get himself an M-16 (he calls a B-B gun)...

Plummley responds, "Time comes, sir, they'll be plenty laying around...".

Jimmy Jimmereeno's picture

To answer your question, yes.  But the alternative and more probable alternative is a high, but not hyper, rate of inflation.  Raging inflation but not in the hyper sense, won't give you the scenario where, "debtors pursue their creditors without mercy."  You will still owe the mortgage but you might find it difficult to budget that loaf of bread.

TxExPat's picture

Depends if your mortgage is fixed rate, or an ARM...

Fixed rate, "your a genius".  ARM "You prepared to see it hit 23%"?

(think that's what the prime rate went to back during the Volcker years, lot of ARMS were "prime + x percent".

That wasn't a full on collapse, just kicking inflation in the face...

 

ToSoft4Truth's picture

The last depression = "people ran out of money".

 

The next depression = "Everyone was working and making money, yet couldn't afford shoes!"

 

This is the problem when government supports industries.  

 

An interesting study would be Carrier staff.  They lost manufacturing jobs and were economically reacting - financial ruin.  Out of nowhere, they got a reprieve.  Trump called them back to work.  How many of them are now financial ants or still financial grasshoppers?  It's a two year study.

 

 

garcam123's picture

I understand your reasoning, but what's the use of "making it" if you're surviving/living in a small community with an undermanned or trained or equipped  24/7 security perimeter against roving bands, etc. and I understand the movie The Postman with Kevin Costner and Tom Petty was a way cool movie...but....somehow that would interrupt my week at the Hamptons with Shitlery and the Donald and his FINNNE First Stuff! I'll bet he ain't seen that muff for, how old is that kid? That long.  That ass has been EXPENSIVE! 

But I would think that a community group os ex-mil and citizens could have a more safe lifestlye in the wilderness, but it won't be like goin to the mall!

That doesn't seem like much of a reason to survive.  WTF is that comet?

lil dirtball's picture

Unsold new autos replacing customers cars on large, increasingly emptier parking lots.

Wait 'til the mall owners get involved.

Winning.

TeethVillage88s's picture

h/t King Jew.

Let me search that. I don't know if that is Horny Tit King Jew.

http://www.womeninthebible.net/women-bible-old-new-testaments/martha-mary/

But I guess there is a story of Jesus mother 'Queen of Heaven' as literal Queen, a family from Syria with wealth of 200 soldiers fleeing from Syria...

The King of Jews, Jesus, wants to be Emperor of Rome and has bloodlines of Mark Anthony & Cleopatra...

http://www.edfu-books.com/

Jesus, King of Edessa -- Released Sept 2012

Yet another year or so goes by and yet another startling revelation has been uncovered in the gospel stories. In fact, one could go as far as saying that this is the book that the Catholic Church has been dreading for the last 1700 years - this is the book that will end Christianity as we know it. And this is not advertising hyperbole, this really is the end of the Christian fairytale that Jesus was a mere pauper artisan.

We now know exactly who Jesus was, and he was far removed from the stereotype pauper imagery we have been told (or sold). Readers can now visit his city, see the ruins of his citadel, gaze upon his statue, and even handle his coins. In reality, Jesus was a son of King Abgarus of Edessa, a king with a small realm, a large treasury, and even bigger ambitions. Thus Jesus' true history undermines much of the biblical fairy-story that the gospel authors crafted, and so Christianity will never be the same again.

The jacket image shows Jesus wearing his Crown of Thorns, the ceremonial crown of the Edessan monarchy.

We suggest that readers start with the books Cleopatra to Christ and then King Jesus. The anticipation before arriving at the last episode in the trilogy will be worthwhile enduring, for if a book could be valued on its 'eureka moments' then this book would be priceless.

Edit:

I should say this is completely different narrative from the Christ of the Western Bible.

Guy is an Analyst who claims 10 to 15 years in writing 3 books on this subject. He links Knights Templars, First Crusade to city of Edessa, and artifacts in Edessa to the French Story of Arthur, Knights of the Round Table... based on actual events... and Astrology is part of the cult of Jesus or Nazarines (a cult of Jews).

ToSoft4Truth's picture

Listen to this guy -

 "Who Is Donald J Trump?" The SHOCKING Untold Story "888"

https://www.youtube.com/watch?v=-r2CpJqqaho&feature=youtu.be

 

 

38BWD22's picture

 

 

I believe that Croesus is referring to Rothschild.

Crush the cube's picture

What's with the 'we' stuff?  Got a mouse in your pocket, or is that legion hive mind talk?

Lets Buy The Dip's picture

with dow up past 20,000 all people can do is party like its 1999 all over again. 

==> SEE HERE, we are up at highs here. 

I guess the real question is, how long with all this EURPHORIC VIAGRA FEULED EXCITEMENT last.... while the US is still in massive debt and TRUMP still wants to spend money and boost the economy with stimulus. Crazy right>?

grgy's picture

Can someone please explain this?

People holding bonds did very well. In an inflationary depression, prices rise, people will get paid in increasingly worthless paper and bonds will collapse.

Seems contradictory to me.

Ballin D's picture

Bond during the great depression would've done well because there was deflation (less dollars bought more things). The author here is speculating there will be inflation so you'll be stuck in a long term instrument that will quickly collapse in value when bond rates start commanding more of an inflation premium.

Bill of Rights's picture

I'd prefer inflation than the liberal version of a utiopia we are living in now . Our cites are a disgrace.

benb's picture

Hey Tom, I was just starting to enjoy myself watching the post inauguration presidential actions after a 24 year political nightmare. Don't piss on the parade.

theBBD's picture

No worries, they will

sixsigma cygnusatratus's picture

Bush II increased the debt from $5T to $10T, and Obama increased it $20T.  Too much debt.  If credit is cut off, we will have a short term deflation first, followed by tons of inflation. I'm thinking either of a Euro currency collapse, UK Sterling reset, China crash or Japan reset could trigger this. 

The solution to all the debt will be to introduce a parallel currency.

King Tut's picture

All presidents dance to the (((bankers'))) tune. Look at all of the Goldman Sachs guys the Orange King of Debt has hired

Doug Eberhardt's picture

sixsgma, correct on short term deflation first. I interviewed John Exter's son-in-law for my last book (he has all of Exter's work and was in the gold mining business internationally at the time) as he sat in on the meeting with Volcker and Exter back in 1980 when Volcker asked Exter what to do. The answer was loosen monetary policy.

Today the Fed doesn't have that luxury with their low inerest rate policy and any talk of raising rates is nonsense. Perhaps negative rates is an option, which I also addressed through the work of Carmen Reinhart (IMF, Harvard).

All one needs to do is look at Exter's Pyramid to see what's coming. If someone disagrees fine, but explain how we have had declining GDP for 70 years (see link to Trading Economics http://www.tradingeconomics.com/united-states/gdp-growth) and increasing credit (see the work of Ned Davis Research) that keeps the game going and not expect an unwinding of that credit before inflation takes hold.

Eventually Kyle Bass will be correct with China and the Trump euphoria is just short term fun for the markets. The U.S. itself is actually doing ok comparitively speaking, but there has to be a contraction before the tons of inflation as you see as well. Everything will flow to perceived safety in treasuries, and interest rates will tumble with a 2009 style contraction and sitting at the bottom of Exter's pyramid is the one asset that will shine: gold (not a recommendation to buy gold now as I think gold will take a hit too and I do sell gold for a living so that might mean something - naturally a long term bull).

Downes went so far as to say that when we do contract, the bid disappears on many assets. There is a reason I have the word "Illusions" in the title of my latest book. We have already seen examples of these illusions when a hedge fund stops withdrawals or even pensions cut back on payouts or benefits. This is during a strong market! What happens when Mrs. Oleary's cow kicks over the lantern?  

 

Doug Eberhardt's picture

Or if you want the detailed view; "In periods of low inflation, even small disinflationary shocks can lead to a fall in the level of prices of goods and services. If economic agents expect prices to continue to fall, they can become less willing to spend—particularly on durable goods whose purchases can be postponed—since the ex-ante real interest rate increases and holding cash generates a positive real yield. Consumption and investment would be deferred farther into the future, leading to a contraction in aggregate demand that would in turn exacerbate deflation pressures. A deflation cycle would then emerge, with weak demand and deflation reinforcing each other, and the economy could end up in a deflation trap.  In this context, the behavior of prices and output could become unstable if monetary policy is constrained by the effective lower bound on interest rates (see, for instance, Benhabib, Schmitt-Grohé, and Uribe 2002; Cochrane 2016).7 These difficulties are aggravated if fiscal policy cannot be readily and efficiently deployed to stimulate demand." https://www.imf.org/external/pubs/ft/weo/2016/02/pdf/text.pdf

Hal n back's picture

the economy fails and chaos rules before we get prolonged deflation. Nothing moves so there is nothing to buy.

Every person for him or herself.

Have to be politically correct.

Doug Eberhardt's picture

Hal n back said; the economy fails and chaos rules before we get prolonged deflation. Nothing moves so there is nothing to buy.

Every person for him or herself.

Have to be politically correct.

 

Wouldn't a failed economy be deflationary? Consumer cuts back; deflationary. Businesses cut back; deflationary. Hoarding; deflationary. Trump and/or the Fed is all that's left to "stimulate;" inflationary (see "pushing on a string" which is where we are now with the trillions of spending and no growth in GDP - been that way a long time). So deflation first, then inflation. The Fed always reacts after the fact. See 2009. Then, this time it will be different; super-inflation. Beyond that speculation on what this article eludes to above (Peter Schiff, Gerald Celente, John Williams from Shadowstats, Jim Rickards will finally be right).

My book that someone asked for above is Illusions of Wealth; https://www.amazon.com/Illusions-Wealth-Actively-Investments-Volatile/dp...  

 

Lost in translation's picture

Can you please provide titles for, or links to, your books?

I'd like to read more on this subject and follow up on everything you've shared, here.

*Edit: sorry for the dumb question, your name is right in front of me... duh.

Found them!

Clowns on Acid's picture

Stagflation. Its a given for at least 2 years.

stant's picture

Of course it's here. And the collapse in the confidence in .GOV , media being part of it has brought us a one Donald J Trump. And I am enjoying watching him make them all his bitch.

idontcare's picture

....and if all bank "accounts" are bailed in, what are businesses going to pay their non-indebted workers with so that those same workers can still pay their property taxes on those paid off homes?   What, do you really think that the counties won't enforce property taxes in a collapse?  More likely, your inability to pay for your property taxes in whatever the means of exchange is at the time will be used as an excuse for the govenment to seize everything you have left and probably put a bullet in your head for trying to resist the seizure.

RafterManFMJ's picture

If they come for your house, burn it to the ground as you retreat. It will be time to go all Red Army on these fucks.

Lost in translation's picture

Love the Scorched Earth reference, you made my day!

Bubba Rum Das's picture

"excuse for the govenment to seize everything you have left and probably put a bullet in your head for trying to resist the seizure."

Doubtful...Because the .Gov boy's have family's too...What you will see at this point will probably be a major organized revolt against the Federal Government & their lackeys (those that are left standing for them, anyway...)

 

Nunya Bidness Gogl's picture

That's what I'm thinking. Finally the normies will realize that us "tin foil hat" anti-government types were right all along.

Although, the statist indoctrination is very very strong here in the USA...

My greatest fear? That governments do exactly as you describe, sieze property (this would be county governments btw (property taxes)) but no where near enough people resist. Regular people lose everything, becoming even more of serfs than we already are. Bam, instant Orwellian nightmare.

 

onewayticket2's picture

Where's the Goldline Ad??

TeethVillage88s's picture

check your shoe soles, hat liner, and underwear!

lol

fucking ads. fucking salesmen.

TeethVillage88s's picture

When Johnny's Fiat comes marching home, harrah, harrah!

When Johnny's Currency comes marching home, Hazzah, Hazzah!

-

When US Currency comes marching home again, Harragh, Harragh!

When Johnny returns from World Reserve Supremacy Hi-rah, Hi-rah!

Gold...Bitches's picture

My bet is they hold off as long as possible with more "financial innovation" as well as continuing the conventional manipulation we all know and love.  When it starts to really blow they'll huddle up and do a massive devalue along with a new system likely built around gold.  And then long enough from that instance and people gain confidence again in the institutions it will begin again with the delinking and the paper backed by nothing other than promises all over again.  It's called history and the fact that it endlessly repeats is because as a species we are the same greedy/fearful/covetous/vainglorious/etc animals we have been all the way back through recorded history.  Why people refuse to see this cycle and think it won't happen again is beyond me.