We could be staring down the barrel of another great depression with inflation ragging, and economies in free fall.
Contractionary monetary policy and fiscal policy to tackle high inflation, in some cases hyperinflation for energy and food makes another great depression almost a certainty.
Q3, 2022 headlines could be dominated by massive corporate layoffs.
Amazon and Twitter Metta are all reducing capacity and laying off staff as they see demand destruction driven by cost-push inflation, and a currency crisis has shrunk household budgets leaving little or nothing for discretionary spending.
If you are seeing fewer Amazon and FedEx vans in your area, it is because household spending is on strike, with exception of essential expenses, a roof, and putting food on the table.
Central bank tightening and fiscal contraction now make a housing crash, the last shoe to drop in 2022, which has seen trillions wiped off bond, stock, and crypto portfolios with almost certainty.
“Q3, 2022 headlines could be dominated by massive corporate layoffs”
As the central banks tighten, in an economic free fall, they are guaranteeing a Great Depression
Perhaps financial and economic historians will look back at the financial-economic recession of 2008 as the prelude to Great Depression two.
The seeds of most financial and economic crises lie in the debt market.
The 2008 financial crisis had its root in the mortgage subprime bond market.
Similarly, the 2022 crisis has its root in the debt market.
So a 2008 debt problem was solved with more debts, and the logical conclusion is that the coming crisis could make 2008 insignificant by comparison.
The Great Depression and a currency crisis
The characteristics of a Great Depression are a currency failure and a failed state. Shortages, worker strikes, and hyperinflation ultimately leading to a societal collapse are the end game.
“the 2022 crisis has its root in the debt market”
What are the signs of a Great Depression societal collapse?
Record levels of crime against property and people.
Public services collapse. A lack of investor confidence or appetite for a nation’s sovereign bonds forces central banks to step in and buy the debt that nobody wants to own. But that increases the money supply, which debases the currency as it depreciates on the foreign exchange market.
The collapse in workers’ purchasing power triggers nationwide industrial action as workers try to maintain their living standards. Basic services collapse, letters don’t get delivered, trains don’t run, public hospitals are understaffed leading to long hours of waiting in accidents and emergencies. Soldiers do not get paid.
Every week the price of staple foods keeps rising in the backdrop of an economic free fall, rising joblessness, homelessness, and crime as desperate people will do whatever it takes to feed themselves and family.
“An Empire built on debt needs to keep extracting wealth to keep its debt currency system afloat” – Win Investing
Capital control is another characteristic of the Great Depression
Policymakers enforce limits on exchanging the local currency for a more stable one and make it illegal to have or trade precious metals forcing investors to sell to the central banks at well below market rate.
Great Depression and global wars
A hegemon has itchy fingers and is at its most dangerous when it feels power and dominance slipping away to another rival.
The history books are full of the armies of Empires pillaging looting, and raping foreign lands for treasure.
An Empire built on debt needs to keep extracting wealth to keep its debt currency system afloat. When it is done, stripping its populace through taxation and trickery, inflation, when its middle class has become so impoverished that there is no more meat on the bone to feed off, the extraction goes global.
The war in Europe, the Ukrainian war, was in the making since 2014 with the overthrow of a democratically elected President.
Why is there no mention of the Minsk agreement, the roadmap to peace in the region?
The alternative is a Ukrainian war, which has resulted in 5 million plus vulnerable refugees and devastated infrastructure in the Ukrainian and Europe’s best interests.
Europe is experiencing a humanitarian, financial and economic disaster on its continent. So it is crystal clear with more US military bases in Europe than anywhere, the European Union is merely a satellite, the hegemon’s colony. EU bureaucrats are highly-paid freeloading puppets.
“Central banks will choose the path of least resistance” – Win Investing
In a prior article it was wrriteen that in an Ant colony, the queen ant sacrifices her ant soldiers to remain on the throne.
The North stream sabotage was an attack on Russian European energy security. It brutally forced Europe back on the USD transatlantic race track, away from the silk road.
To defend US hegemony, a major energy infrastructure has been attacked, which is an act of war. Europe is undergoing forced deindustrialization while the hegemon industrialises.
Russia’s economy is energy commodity-based, so it could also experience a great depression. Reports are surfacing in western media that Russian soldiers are not being paid and are on strike.
As Putin becomes more cornered, nuclear war becomes more likely.
The Great Depression and the Great pivot
Central banks will choose the path of least resistance.
A systemic crisis also means a legitimation crisis which can lead to a popular uprising.
When the political fallout from home foreclosures and a wave of job loss come home to roost, monetary policy will pivot.
QE light is already in play with stealth bank bailouts, the largest USD credit SWAP in history, and the BoE’s decision to buy gilts to prevent a sovereign debt and currency meltdown.
The central bank’s game is to keep printing, inflate the debt away, and until the hegemon remains on the throne, there is no alternative. The gig can keep going for as long as infinity.
Today, in 2022, an average loaf of bread currently costs 2.50 USD, and in 2122, 250 USD? The greatest fear is two great powers, Russia and the USA, fighting for their survival, with the former facing an existential threat, the latter a systemic threat.