The Deep State
By Doug Casey, International Man
This essay explores certain facets of what is often referred to as the Greater Depression.
The events of 2008 marked a turning point that many of us have yet to fully comprehend. In the years that followed, an influx of trillions in new currency has led to a temporary reprieve. However, the economic indicators show that we are still in the same predicament we faced in 2007, and the ominous forces of financial disaster are poised to circumvent us once more. This time, they are not coming on gentle steeds but rather on formidable armored horses.
To clarify, let’s revisit the definition of a depression.
Broadly speaking, a depression is defined as a phase where the majority of people experience a notable decline in their standard of living. By this metric, the Greater Depression is often thought to have commenced in 2008. Yet, some historians might argue that its roots extend back to 1971, when real wages began to decline.
Moreover, a depression signifies a critical period where financial distortions and misallocation of resources are corrected, as the business cycle—driven solely by currency debasement or inflation—reaches its peak. Continue reading
Fiscal policy is generally more understandable for the average person compared to monetary policy. Concepts like income taxes, budget deficits, and national debt are concrete issues that resonate with everyday workers.
The effects of Zero Interest Rate Policy (ZIRP) or Quantitative Easing (QE), however, remain obscured to most. People may experience the economic swings induced by central bank interventions but fail to make the connection back to the Federal Reserve. Misguidedly, they might criticize capitalism without unraveling the deeper influences of the Fed’s monetary maneuvers.
For the diligent worker, despite their relentless efforts, life may not improve as expected; in fact, it might worsen. Many remain unaware that stringent monetary policies could be contributing factors to their struggles.
Recent graduates working meagerly at coffee shops and drowning in student debt are likely to realize that something is fundamentally amiss. Why do educational costs diverge so sharply from the value they offer? Continue reading
An unusual occurrence is taking place—something not seen since 1988, when the U.S. federal debt was merely $2.6 trillion.
As reported by the Institute of International Finance, for the first time in 27 years, wealth is exiting emerging markets instead of flowing in. Net outflows for emerging markets are expected to reach $540 billion in 2015. What’s driving this change?
In summary, investors are withdrawing funds from emerging markets more rapidly than they are being invested. Concerns about instability in countries like China, Russia, and Brazil are pushing investors to seek safer avenues. However, that is only part of the story.
Economically, emerging markets are faltering. The MSCI Emerging Market Index has hit a six-year low. The strengthening U.S. dollar, coupled with deteriorating emerging market currencies, exacerbates the cost of dollar-denominated debt for these nations.
These economies are already burdened with overwhelming debt. Continue reading
The current debt-based monetary system continues to function as intended. The Fed provides limitless credit, which is borrowed and spent by both public and private sectors.
A prevalent misconception in today’s culture is the belief that these debts will never need repayment. Although there is no logical framework to support this notion, it remains widespread.
Day by day, the financial obligations accumulate, akin to wrecked vehicles lining a congested freeway. Over the past three decades, these have amassed beyond what the economy can sustain.
The tipping point came in 2008, and we now find ourselves in a phase of denial. Many individuals are reluctant to confront their new reality, as it deviates from the expectations they had.
The Fed’s scientific management of the economy was believed to be a mechanism to consistently inflate away each generation’s debts. Continue reading
