User:Conservative/Economic depressions
User:Conservative/Economics and investing
Economic depression / Economic collapse
See also: Great Depression
Jim Rogers
Nouriel Roubini
Videos/articles
Recession/depression proof businesses/jobs
Summary
"When the recession comes, it will not be short and shallow but long and severe. Not only are we facing persistent short- and medium-term negative supply shocks, but we are also heading into the mother of all debt crises, owing to soaring private and public debt ratios over the last few decades. Low debt ratios spared us from that outcome in the 1970s. And though we certainly had debt crises following the 2008 crash – the result of excessive household, bank, and government debt – we also had deflation. It was a demand shock and a credit crunch that could be met with massive monetary, fiscal, and credit easing.
Today, we are experiencing the worst elements of both the 1970s and 2008. Multiple, persistent negative supply shocks have coincided with debt ratios that are even higher than they were during the global financial crisis. These inflationary pressures are forcing central banks to tighten monetary policy even though we are heading into a recession. That makes the current situation fundamentally different from both the global financial crisis and the COVID-19 crisis. Everyone should be preparing for what may come to be remembered as the Great Stagflationary Debt Crisis.
While central banks have been at pains to sound more hawkish, we should be skeptical of their professed willingness to fight inflation at any cost. Once they find themselves in a debt trap, they will have to blink. With debt ratios so high, fighting inflation will cause an economic and financial crash that will be deemed politically unacceptable. Major central banks will feel as though they have no choice but to backpedal, and inflation, the debasement of fiat currencies, boom-bust cycles, and financial crises will become even more severe and frequent.
The inevitability of central banks wimping out was recently on display in the United Kingdom. Faced with the market reaction to the Truss government’s reckless fiscal stimulus, the BOE had to launch an emergency quantitative-easing (QE) program to buy up government bonds. That sad episode confirmed that in the UK, as in many other countries, monetary policy is increasingly subject to fiscal capture.
Recall that a similar turnaround occurred in 2019, when the Fed, after previously signaling continued rate hikes and quantitative-tightening, stopped its QT program and started pursuing a mix of backdoor QE and policy-rate cuts at the first sign of mild financial pressures and a growth slowdown. Central banks will talk tough; but, in a world of excessive debt and risks of an economic and financial crash, there is good reason to doubt their willingness to do “whatever it takes” to return inflation to its target rate.
With governments unable to reduce high debts and deficits by spending less or raising revenues, those that can borrow in their own currency will increasingly resort to the “inflation tax”: relying on unexpected price growth to wipe out long-term nominal liabilities at fixed interest rates.
How will financial markets and prices of equities and bonds perform in the face of rising inflation and the return of stagflation? It is likely that, as in the stagflation of the 1970s, both components of any traditional asset portfolio will suffer, potentially incurring massive losses. Inflation is bad for bond portfolios, which will take losses as yields increase and prices fall, as well as for equities, whose valuations are hurt by rising interest rates.
For the first time in decades, a 60/40 portfolio of equities and bonds suffered massive losses in 2022, because bond yields have surged while equities have gone into a bear market. By 1982, at the peak of the stagflation decade, the average S&P 500 firm’s price-to-earnings ratio was down to eight; today, it is closer to 20, which suggests that the bear market could end up being even more protracted and severe. Investors will need to find assets to hedge against inflation, political and geopolitical risks, and environmental damage: these include short-term government bonds and inflation-indexed bonds, gold and other precious metals, and real estate that is resilient to environmental damage."[1]
BOE and QE:
"Critics say QE played a major role in pushing up house prices and stock markets for more than a decade, worsening inequality. The BoE has said that without QE, consumer price inflation would have undershot its 2% target during the 2010s, and that unemployment would have been much higher at points."[2]
Books
- MegaThreats: Ten Dangerous Trends That Imperil Our Future, And How to Survive Them by Nouriel Roubini
ITR Economics
Intro: The Coming Great Depression of the 2030s
- Countries that will rebound from economic depression faster - Developed countries like the United States (Borders young Mexico) and other developed countries with comparatively younger demographics than other developed countries are better positioned to rebound (see: List of countries by median age).
Causes:
Book:
- Prosperity in the Age of Decline: How to Lead Your Business and Preserve Wealth Through the Coming Business Cycles by Alan Beaulieu
Ray Dahlio
Principles for Dealing with the Changing World Order by Ray Dalio
- Principles for Dealing with the Changing World Order by Ray Dalio -2022 (Ray Dahlio has some good ideas, but he is inconsistent when it comes to China. See: Economist Fact-Checks Ray Dalio's China Analysis)
Jamie Dimon
Others
Prepper/frugality
Other resources
- The Return Of The Great Depression - Vox Day and Sean Hannity
Resources on how to prepare:
Hard core survivalist material:
Other info:
- How to Survive the End of the World as We Know It: Tactics, Techniques, and Technologies for Uncertain Times by James Wesley Rawles
Vox Day indicates that debt fueled GDP growth will ultimately lead to a Great Depression 2.0 that will last for a decade or more.[6][7]
Vox Day predicts an economic collapse in 2033.[8]
Vox Day was one of the few that predicted the 2007 financial crisis. Gerald Celente argues that debt and a reduced productive capacity will also lead to a severe economic depression. Austrian economists are generally better at predicting recessions/depressions due to financial bubbles bursting which are the result of governmental policies or other factors.[9]
Predicting when the Great Depression 2.0 in the short term is very difficult due to the band aids the central banks are putting on the Western economies. Jim Rogers is an excellent investor but lousy trader and often financial analysts have problems predicting the short term.
Historical guide of when a big downturn will hit by Jeremy Grantham: "We do think the market is going to go higher because the Fed hasn't ended its game, and it won't stop playing until we are in old-fashioned bubble territory and it bursts, which usually happens at two standard deviations from the market's mean. That would take us to 2,350 on the S&P 500, or roughly 25% from where we are now."[10] Grantham predicts 7 years of negative returns for the stock market once the bubble burst.[11]
- This is a bubble and it will burst - No underlying value being created and it is just quantitative easing distortion of the market
If stock market gets out of its current stall, based on recent anemic growth of S&P 500, an economic crash could happen in the first/second quarter of 2015. Americans are dispirited though and ObamaCare isn't going to make things any better so downturn could happen in 2014 (Even Soros is betting against the S&P 500 and is exercising put options.[12][13]).
Predicting a market crash by the consensus opinion is foolhardy and you will never see it coming. [14] 2014 will see a lot of volatility.[15]
Hedging your bets in case of a stock market crash.[16]
When countries go bankrupt
Is the USA bankrupt and postponing the inevitable?
- Is American bankrupt?, Forbes 2012
U.S. Debt crisis
The problem with over printing money
Economic effects of war
US federal govt debt as a percentage of GDP: http://www.usgovernmentspending.com/federal_debt_chart.html
- Expected Congressional gridlock and Federal Reserve Quantitative Easing policy will not work and stock market could take an abrupt downturn in about 6 months or less.[17][18][19]
Effects of global financial collapse:
- Free advice - economist Robert Murphy's blog
Potential economic collapse, Patrick Bet-David:
- America Collapsing Like Rome?- Upcoming Recession, WW3, Trump, China & Joe Rogan | Patrick Bet David
Potential economic collapse:
- 27 facts about the US economy
- 50 facts every American should know about the U.S. economy heading in a downward spiral.[20]
- 20 questions to ask someone who believes the U.S. financial crises is over.[21]
- How the middle class is shrinking
- Shrinking middle class in America
Comparison of current crises to the 17 century economic problems and other crisis
Some prior periods of mankind's history like 1347 to 1351 (Black Death) and 1918-1945 (Spanish flu, WWI, Great Depression and WWII).
The leading investment expert Harry Schultz writes: “Roughly speaking, the mess we are in is the worst since 17th century financial collapse. Comparisons with the 1930’s are ludicrous. We’ve gone far beyond that. And, alas, the courage & political will to recognize the mess & act wisely to reverse gears, is absent in U.S. leadership, where the problems were hatched & where the rot is by far the deepest.”[22]
Some articles on the 17th century "General Crises" can be read HERE and HERE and HERE
Recessions after fiscal crises take much longer to recover historically
- Recessions after fiscal crises take much longer to recover historically - Keynesian economics source
Eurocrises
- The eurozone crisis explained in 5 simple graphs
- Germany and the birthrate problem
- What's really behind Europe's decline? It's the birthrates - Forbes
Oil
Economic crises in history
- 5 of the World’s Most Devastating Financial Crises, Britannica]
Survivalism Recommended books
- How to Survive the End of the World as We Know It: Tactics, Techniques, and Technologies for Uncertain Times by James Wesley Rawles
- The Prepper's Guide to Surviving the End of the World, as We Know It: Gear, Skills, and Related Know-How by M.D. Creekmore