The Great Deflation

Wisdom comes alone through suffering.

I went down to the Cleveland Public Library and paged through the old chart books of commodity prices and stocks stretching back into the 19th century. I found that, in the 1930s, all commodities, with the sole exception of gold, bottomed at the lows of the prior sixty years. Most public companies ceased to exist. They had gone bankrupt. The shareholders were wiped out. The assets were taken by the secured creditors, the banks selected by the Federal Reserve System.

Price levels did not recover for decades.

In 1923, Grandpa Rogers, the surgeon who had been in the first U.S. medical unit into the Great War, bought three housing lots in Shaker Heights, a new upscale suburb of Cleveland. These properties would have gone up in value through the 20’s. In 1929, the stock market crashed. He was probably quite glad that he had not sold the lots and put the money into the stock market. In 1933, when the banks were closed, he was probably quite glad that he had not sold the lots and put the money in the banks. In 1952, three decades later, his widow finally sold the lots for one third of what Grandpa Rogers had paid for them in 1923. This was not because Shaker Heights was economically depressed in 1952. Shaker Heights was, in the 1950’s and into the early 1960’s, statistically, the wealthiest suburb in the United States.

In 1905, my great, great grandfather’s coal yard was valued in a bank appraisal at $126,000. A modern industrial building with heavy overhead hoists was built on the property in the 1920s by my grandfather; that became the site of Webb Equipment, the crane and hoist business. After my father’s death in 1981, this property, with equipment and materials, was sold for less than $80,000. This was after three quarters of a century.

Further confirmation of the persistence of the deflation is found in this paper by Tom Nicholas and Anna Scherbina titled “Real Estate Prices During the Roaring Twenties and the Great Depression” [49]:

Using unique data on real estate transactions, we construct nominal and CPI-adjusted hedonic price indices for Manhattan from 1920 to 1939. The CPI-adjusted index falls during the recession that followed WWI, rises to a local peak in 1926 and declines again following the collapse of the Florida real estate bubble. It subsequently recovers to reach its highest value in late 1929 before falling by 74 percent at the end of 1932 and hovering around that value until 1939. A typical property bought in the beginning of 1920 would have retained only 41 percent of its initial value two decades later.

And this was Manhattan!

Consider that in the period from the 1920s into the 1950’s (more than three decades), there was little recovery in price level. Think of the absolutely massive demand drivers present through those decades:

No such drivers of demand are present now. It is quite the opposite. Artificial Intelligence (AI) and robotics are inherently deflationary. We are told that people are not needed. Perhaps that is a tad deflationary.

The “inflation” we are now seeing is not due to strength in the global economy. The underlying intractable problem of our time is not inflation but deflation. The “inflation” is illusory; it is created by massive devaluation of money and artificial scarcity (consider the implications of the Nordstream sabotage).

Perhaps you have heard of the “Everything Bubble.” What is it?

I will explain the horror of it simply. Let’s take the example of a single bond with no fixed maturity date, i.e., a perpetuity. This bond pays a fixed annual dividend of $5. If the market rate of interest is 5%, this bond has a value of $100. If the Fed lowers interest rates such that the market rate of interest for this bond is now 1%, what happens to the value of the perpetuity? The fixed dividend of $5 remains unchanged. As 5 is 1% of 500, the value of the perpetuity goes up five-fold to $500. Now if the Fed increases market rates back to 5%, the value of the perpetuity paying a fixed dividend of $5 returns to $100, and hence, there is an 80% decline in value. It’s basic math.

The entire global financial complex is, essentially, a big perpetuity, i.e. a financial instrument with no fixed maturity date. The prices of all fixed income instruments are determined by interest rates, and all equity market and commercial real estate values are similarly driven.

The Fed created the “Everything Bubble” with the justification of fighting the Global Financial Crisis, which of course the Fed had also created, by lowering the Fed Funds Rate from 5% to near zero, and then keeping it near zero for most of the past 15 years. The Fed has now increased the Fed Funds Rate from near zero in April of 2022 to more than 5.00% in just one year.

That the decline in global financial and real estate markets will be massive, has been made certain. This cake is baked. The financial gains of the past 15 years have been an illusion. Some take comfort in thinking that the losses can be hedged in the derivatives market. If that is the case, the losses do not disappear. They are in the derivatives complex. Epic losses will be concentrated on the balance sheets of the CCPs, which, as we have seen, are designed to fail.

Some take comfort in saying that the Fed will lower rates again when they are forced to do so. Have you noticed that they are not lowering rates despite the first bank failures? This is just the beginning of such failures given the basic math explained above. The Fed is sharply increasing rates into economic weakness, and a banking crisis. This is exactly what was done in the Great Depression. And they are doing this with the bizarre and cruel justification of fighting wage growth!

When the “Everything Bubble” is imploded, we will face a deflationary depression, which will span many years, even decades. This coming Great Deflation is intrinsic to the Great Taking.

The Architects of the Great Taking have planned and prepared to use this dynamic fully, secure in their knowledge that, as night follows day, massive and prolonged deflation will certainly follow the epic debt expansion super cycle, which they created.

The Architects have assured that they alone are positioned to take everything, and that you and your children are positioned on the other side of that, i.e., to lose everything, to be enslaved and even destroyed by it. People will be knocked down, and not be able to get up again. That is intentional, as the populace has been systematically encouraged to go deeply into debt. Whom the gods would destroy, they first cause to borrow at low rates of interest!

As in the Great Depression, prolonged deflation will assure that people who are in debt will not be able to make payments on their debts, let alone repay them. They will be trapped. All property and businesses financed with debt will be taken.

With profound and persistent deflation assured to stretch over many years, debt becomes a powerful weapon of conquest.

Debt is not a real thing. It is an invention, a construct designed to take real things.

It is instructive to look at the deeper meaning of the word, debt.

The root word is believed by etymologists to be an ancient Proto-Indo-European word, ghabh, meaning to give, to hold, or to receive. It is found, e.g., in the Sanskrit gabhasti (hand, forearm); the Latin habere (to have, hold, possess); the Old English giefan and Old Norse gefa (to give), and in the present-day Swedish ger (gives) [50].

However, the Latin prefix, de, meaning to do the opposite, or undo, or take away totally and completely (think of the word, defrost), utterly negates this giving, having, or holding. Again according to the Online Etymology Dictionary [51], the Latin word debere means “‘to owe’, originally ‘keep something away from someone,’ from de ‘away’ + habere ‘to have’.” In medieval Latin, the meaning of habere was “goods, capital, investment” [52].

The bottom line is that debt has for centuries had the function of dispossessing, of taking away property, capital and investments from someone.

We can plainly see in their deliberate preparations over decades to take on a vast scale that there will be no debt forgiveness. Ancient societies knew the practice of the debt jubilee, i.e. a comprehensive forgiveness of debts; it was enacted repeatedly in the interest of general human welfare. No debt forgiveness is intended now. But what purpose should the artificial constructs and institutions of society serve, if not human welfare? What must vitally concern each and all of us, if not human welfare?

The powers-that-be have designed an elaborate legal construct to prevent individual states from directing their central banks to create the money to protect the depositors. If many trillions can be created to bail out private banks, the same could certainly be done to bail out the depositors as a social imperative. That it will not be done is a sign of the true intent—deprivation and subjugation.

This “Great Reset” is anti-human. It is intended to fix in place a system something like feudalism in perpetuity, in which the populace is held in a state of deprivation and fear with the empty promise of safety. Wake up! We have been living within a protection racket, in which the “protectors” terrorize the “protected.” Those supposedly protecting us from the “bad guys” ARE THE BAD GUYS!