No 25-Yr Depression: 'It Will Be Much Worse Than That.'

Newspaper from October 24 1929, a.k.a. “Black Thursday” – at this point, the panic had just begun with the market losing 11% in one day. On the next two trading days (Friday and Saturday – at the time, the market was open on Saturdays) the market rebounded slightly, then came “Black Monday” and “Black Tuesday”, which erased all doubt about the seriousness of the situation

Submitted by Bill Bonner via Acting-Man.com / ZeroHedge

Good and Bad News

Today, we have bad news and good news. The good news is that there will be no 25-year recession. Nor will there be a depression that will last the rest of our lifetimes.

The bad news: It will be much worse than that. On Monday, the Dow rose another 43 points. Gold seems to be working its way back to the $1,200 level, where it feels most comfortable.

“A long depression” has been much discussed in the financial press. Several economists are predicting many years of sluggish or negative growth. It is the obvious consequence of several overlapping trends and existing conditions.

Old People Are Dead Wood

First, people are getting older. Especially in Europe and Japan, but also in China, Russia and the US. As we’ve described many times, as people get older, they change. They stop producing and begin consuming.

They are no longer the dynamic innovators and eager early adopters of their youth; they become the old dogs who won’t learn new tricks.

Nor are they the green and growing timber of a healthy economy; instead, they become dead wood. There’s nothing wrong with growing old.

There’s nothing wrong with dying either, at least from a philosophical point of view. But it’s not going to increase auto sales or boost incomes – except for the undertakers.

Mr. Hislop is looking forward to booming business

Photo credit: State Library of Queensland

The Cure for Debt? More Debt!

Second, most large economies are deeply in debt. The increase in debt levels began after World War II and sped up after the money system changed in 1968-71.

By 2007, US consumers reached what was probably “peak debt.” That is, they couldn’t continue to borrow and spend as they had for the previous half a century. Most of their debt was mortgage debt, and the price of housing was falling.

The feds reacted, as they always do… inappropriately. They tried to cure a debt problem with more debt. But consumers were both unwilling and unable to borrow. Their incomes and their collateral were going down. This left corporations and government to aim only for their own toes.

Central banks created more money and credit – trillions of dollars of it. But since the household sector wasn’t borrowing, the money went into financial assets and zombie government spending.

Neither provided any significant support for wages or output. So, the real economy went soft, even as the cost of credit fell to its lowest levels in history.

Read more at ZeroHedge:

http://www.zerohedge.com/news/2015-05-06/there-will-be-no-25-year-depression