WND column

Too Soon to Tell

It was just over one year ago that WND Books published “The Return of the Great Depression.” In that book, I articulated six possible scenarios and explained which scenario I considered to be most likely. I also made a number of predictions, some of which can now be profitably analyzed to see how accurate they were. Keep in mind that at the time the book was published, the end of October 2009, the scenario which most of the mainstream economists were declaring to be in effect was the Green Shoots scenario.

ADDENDUM TO THE COLUMN: The chart above illustrates why I am dubious about Whiskey Zulu being in effect despite my cognizance of the possibility given commodity prices. I’ll go into significantly more detail about gold prices and inflation vs deflation in a future post, but the chart illustrates why we have seen so little debt-deflation to date despite the unprecedented $2.8 trillion collapse in the household and financial sectors. It would appear that Gresham’s Law applies to debt as well as coin.  In summary, we haven’t actually seen anything yet nor will we until a) the financial and household sectors start taking on new debt, or b) the government’s debt creation cannot keep pace with the declining debt of the other sectors.  I left the financial sector off in order to illustrate the comparison of the real economy’s debt with that of the government’s interventions in it, but financial debt has declined to 28.3% from a 2008 peak of 32.5%, hence the $3.4 trillion in new government debt created since the second quarter of 2008.

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