After the Storm
Recently by Jeff Thomas: Ignoring the Obvious
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The other day, an associate whom I like to think of as having a decent, if not holistic, view of the present depression, commented to me, "I wish we could just have the crash tomorrow and everything that goes with it, so that, next year, we can get back to normal."
Oops ... maybe his expectations are a bit more simplified than I thought. And, if others share his view, possibly the topic needs a bit of fleshing-out. While it may not be ready to be a prime topic of the ongoing conversation, possibly an outline of what may happen after all the fireworks have gone off would be in order.
Ten Years Down and Ten Years Up
Economic wizard (and favourite 'Uncle') Harry Schultz stated back in the early 2000's that what he anticipated was "ten years down and ten years up." At the time, many thought that his projection was extremely prolonged. I didn't think so. People do commonly seem to take the view that, once the various crashes have taken place, we simply walk out into the sun, brush the dirt off the knees of our trousers, and, with a spring in our step, walk into the bright new day.However, a depression is not at all like that. It is more like a town after a hurricane has hit. The storm may have been swift, but the recovery is not. Power lines are down. Roads are blocked. Homes and stores have been destroyed. Having personally been highly involved in the reconstruction of a small country after the devastation wrought by a category five hurricane, I can attest that, even if the population is hardworking and motivated (which they were), the task of rebuilding is monumental, and the time period required to achieve it is prolonged.
I see the period after the various crashes very differently from those who anticipate immediate recovery symptoms. This is not because I imagine myself a visionary; my view is based on history. If we look at the economic collapses of the past, (inclusive of their possible knock-on effects, such as hyperinflation and destruction of the currency), from the fall of the Roman Empire to Weimar Germany, to Argentina and Zimbabwe - take your pick - the pattern is extremely similar.
So, let's have a look at that pattern and ask ourselves if the present situation might not play out much the same (except far worse and more prolonged, as the conditions that led to this particular depression have been more extreme). The various stages are likely to be a given, but the various factors within each stage are a bit more uncertain. In every major economic collapse, some combination of these factors takes place.
Also, consider that the stages themselves are like dominoes - they almost always fall in order. The reason? Details change in history, but human nature remains the same. The same knee-jerk reactions by people will repeat themselves over and over. (As an example, we are now experiencing a decline in exports from the First World. I believe that a repeat of the disastrous Smoot-Hawley Tariff of the 1930's will be passed in America, which undoubtedly would trigger increased hardship for Americans.)
Stages of The Crash
The stages are laid out below. The first three have already occurred.1 INITIAL CRASHES
- Crash of the residential property market
- Crash of the commercial property market
- Crash of the stock market
- Loss of homes
- Loss of jobs
- Inflation
- Bailouts for select groups
- Dramatic increase of debt
- Politicians going in the opposite direction of a real solution
In this stage, the politicians on both sides fail to focus on a real solution. Instead, their primary focuses are, first, to avoid a painful real solution, and, second, to engage in finger-pointing, each political party blaming the other for the problem. The problem worsens steadily until one of the next series of major dominoes falls. This is usually sudden and triggers the toppling of other dominoes.
4 SECOND WAVE OF CRASHES
- Major crash in stock market
- Currency plummets
- Increased bankruptcies
- Increased unemployment
- Foreign countries refuse to accept more debt
- Foreign trade slows dramatically
6 GOVERNMENT INSTITUTES DESPERATE SELF-DESTRUCTIVE MEASURES
- Defaults on debt
- Restrictive tariffs on imports
- Currency controls
- Hyperinflation - dramatic increase in food and fuel costs
- Massive unemployment
- Extensive foreclosures
- Extensive bankruptcies
8 SYSTEMIC COLLAPSE
- Bank closures
- Extensive homelessness
- Food and fuel shortages
- Electric power becomes sporadic, blackouts common
9 SOCIAL COLLAPSE
- Crime rises dramatically (particularly street crime)
- Food riots
- Tax revolts
- Squatters' rebellions
- Creation of special army to address "domestic terrorism"
- Random killings become commonplace
11 REVOLUTION
If revolution is to occur, it will happen at this point. Many people will feel that they have nothing to lose, and anger will be at its peak. If revolution does take place, it will not be an organized movement as such. It will be spontaneous, and breakouts will manifest themselves like popcorn popping, largely at random, with ever-increasing frequency. At some point, it may possibly evolve into something more organized.
If you enjoyed this article, you might like our complimentary report, The Best of Jeff Thomas. Pulling no punches, Jeff shares his thoughts on the greatest threat to gold ownership, finding a bolthole on a budget, as well as the coming hyperinflation. You may download this free report immediately in our member's area. Or, if you are not a member, register for free here.
Reprinted from International Man with permission.
August 25, 2012
Jeff Thomas [send him mail] is British and resides in the Caribbean. The son of an economist and historian, he learned early to be distrustful of governments as a general principle. He began his study of economics around 1990, learning initially from Sir John Templeton, then Harry Schulz and Doug Casey and later others of an Austrian persuasion.
Copyright © 2012 International Man
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