Worst Since Great Depression?

Current Economic Downturn Is Worst Since Great Depression

By John Williams, Shadowstats.Com | 5 August 2009
Extract originally published on 321gold with kind permission of John Williams.

Overview

U.S. Economy Is in a Multiple-Dip Depression. The grand benchmark revision of the national income accounts on July 31, 2009 confirmed that the U.S. economy is in its worst economic contraction since the first downleg of the Great Depression, which was a double-dip depression. The current economic downturn increasingly will be referred to as a depression, and it is far from over. There will be intermittent blips of new activity, such as the current cash-for-clunkers automobile giveaway program that appears to be generating a one-time spike in auto sales. Yet, this downturn will continue to deteriorate, proving to be extremely protracted, extremely deep and particularly nonresponsive to traditional stimuli.

As discussed in recent writings, the economy suffers from [severe] underlying structural problems tied to consumer income, where households cannot keep up with inflation [[and haven't been able to for almost a generation: normxxx]] and no longer can rely on 'excessive' [[largely unlimited: normxxx]] debt expansion for meeting short-falls in maintaining living standards. These structural issues are not being addressed meaningfully and cannot be addressed without a significant shift in government economic and trade policies, which under the best of circumstances still would drag out economic woes for many years.

The current depression likely will show multiple dips in business activity, as was seen during the Great Depression and in the double-dip recession of the early-1980s. I argue that the current downturn started at least a year earlier than the December 2007 onset proclaimed by the National Bureau of Economic Research (NBER), official arbiter of U.S. recessions. The current depression is the second dip in a multiple-dip downturn that started back in 1999, and it preceded and in fact was the proximal trigger for the systemic solvency crisis that rose to public view in August 2007. The ensuing systemic problems did not cause the slowdown in business activity, but they exacerbated it significantly.

While the current circumstance should become recognized as a "depression," worse yet lies ahead as the U.S. government's long-range insolvency and current efforts at debasing the U.S. dollar trigger a hyperinflation in the next five years[!?!] Risks for the onset of a hyperinflation in the United States are particularly high during the next year. As will be discussed in the soon-to-be-updated Hyperinflation Special Report (see the existing April 2008 version for basic background), the United States would be particularly hard hit by such a circumstance. Unlike Zimbabwe, which has been able to maintain some level of functioning commerce during its hyperinflation, due to the backstop of an active black market in U.S. dollars, the United States has no such backstop. Accordingly, a U.S. hyperinflation likely would force cessation of regular commerce, triggering a great depression of a magnitude never before seen in the United States.

[ Normxxx Here:  FWIW, hyperinflation is not a significant economic threat: we know exactly how to 'nip it in the bud'— given the political will! All it takes is a severe contraction of the money supply (such as engineered by Volcker in 1980, and by every country experiencing hyperinflation that was determined to end it, since all of the countries went off the gold standard in the '20s and '30s. Of course, 'severe contraction' equals 'severe recession/depression'. Which is why I am predicting waves of deflation/inflation in the years ahead— almost impossible to profit in such a climate; the best one can do is to lose as little purchasing power in the end as possible…  ]

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Normxxx    
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