Guest Post by Martin Armstrong
Some people have a very hard time understanding that we are in a massive deflationary spiral; they think that rising prices simply means it is inflation and not deflation. Then they mistake stagflation for deflation and wonder why people are spending more on less. They only see prices, not disposable income, and certainly not economic growth and unemployment.
Prices rose sharply following the OPEC oil price hikes of the 1970s, but the sharp rise in energy crowded out other forms of spending, resulting in rising prices that had nothing to do with a speculative economic expansion but a deflationary contraction they called STAGFLATION occurred with rising prices and declining economic growth.
This is like Biden saying vaguely that he will press corporations to raise wages and lower prices. Great plan, which, as always, means absolutely nothing and illustrates that he has nothing to offer. Biden revealed his position that government is never the problem. If you want to raise NET DISPOSABLE INCOME, lower taxes! Raising wages, as he argues corporations should do, will escalate people to higher tax brackets, and soon, all benefits will come into play with these socialistic programs. As always, nobody in government ever talks about reducing the size of government waste and corruption.
Household income will soon be defined as everyone living in the same house – kids and all. Perhaps you will have to pitch a tent and make the kids sleep outside with the dog to avoid “household” income tax increases. Deflation is not the lowering of prices, it is the lowering of economic activity that can also include STAGFLATION, which occurs when prices rise but there is no economic growth.
Now, stagflation is not exactly the same as deflation, where the price of goods and services do decline. For example, prior to World War II, the US experienced a massive deflationary environment where GDP fell 30% between the crash of 1929 and 1933. A quarter of Americans were unemployed. Prices plummeted, and consumers were not spending because they had very little, if anything, to spend. Panics erupted, and people hoarded; the Second World War brought America out of that economic downfall.
During periods of stagflation, the prices of goods and services increase while buying power decreases. Consumers end up spending more on less. As we are seeing now, for example, retail sales on items such as clothing have declined, but people are spending more on gas and groceries. People feel as if they are earning less despite earning more because their buying power has been drastically reduced. Companies will suffer as consumers spend less, as we are seeing at restaurants, as one example, and this will lead to reductions in the workforce. Unemployment during the OPEC crisis of the 1970s was not nearly as drastic but unemployment did rise to 7.2% by 1980. Inflation went from around 1% in 1964 to 14% in 1980, and GDP growth went from 5.8% to -0.3% during that same period.
So be very careful. If you only look at prices rising and ignore the fact that your disposable income is declining, you will be in for a very rude awakening.
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The average American couldn’t pass Econ 101 after taking it for three years.
You including Marty in that assessment?
You should be. Nothing Armstrong says in this article makes a lick of sense.
You mean the Marty that believes in the FED and studies ancient gold coins to determine the rise and fall of past civilizations…but isn’t a fan of gold?
Econ as it it taught now in Uni is what turns out charlatans like Larry summers, and the guy who wrote this article. Experts in spaghetti logic. What really matters is that thing called the “Friedman Doctrine” that happened in 1970. Uncle Milty Friedman’s article “A Friedman doctrine‐- The Social Responsibility of Business Is to Increase Its Profits” published in Sept 1970. It’s still there if you plug the title in the search bar, and you want your blood to run cold while you read it.
Avoid the short squeeze by avoiding debt. Keep investment capital at the ready for the deflation endgame and always stack metals for insurance.
>>>always stack metals for insurance.
You’ll know something big is coming when IRS Form 1040 asks whether you own any PMs, as they already ask if you own crypto currency. One major positive I see in holding gold etc. is that to date is non-reportable to government.
When I’m feeling particularly hostile to the feds, I wonder whether I shouldn’t just convert ALL my investments into phyz, and never again file another fvcking income tax return. Except, of course, to report any taxable capital “gain”.
“As always, nobody in government ever talks about reducing the size of government waste and corruption.”
Not true. The GOP incessantly spews their empty whine on this subject, but invariably vote yes on every pork barrel spending bill that comes to the floor, and not only that , but they initiate most….but imma’ voting conservative party….reeeee
Inflation is a form of raising taxes. Pay for a product and of course the State’s sales tax is higher if they have one which most State’s do. Here property taxes were raised by not raising the rates but by having the value of property go up. That way politicians can claim they didn’t raise taxes. There is an old saying about ‘being land poor’, where the value of the land has been raised but not the income to pay the taxes.
I have to collect sales taxes under the penalty of jail if not reporting them. The State of NC is so sorry as not to even supply the envelopes to send in the amounts and check. Government workers including school teachers and even the guys that pick up the trash in cities are the equivalent of Communist Party people. That sales tax money flows to them.
There are more $100 bills in circulation than $1 bills, and …
Visualizing All of the U.S. Currency in Circulation – Visual Capitalist
Vast majority? Other countries.
govt. was always the biggest counterfeiter.
taxes are about intimidation/control.
A rude awakening no matter what Martin
I’d like to thank the author who, like a grammar Nazi, has taken the time to put a fine point on the definition of our demise…merely degrees of the same disease known as the FED.
“…the Second World War brought America out of that economic downfall..”
Uh no, Martin, the War did not cause the end of the Great Depression.
That’s complete crap