Who Wants a Deflationary Depression?
The only people who would desire a deflationary depression would be those who would greatly benefit by its occurrence. So the question is better stated who would stand to benefit most from a deflationary depression?
Though many suffered from the Great Depression of the 1930′s there were those who reaped incredible and previously unimaginable monetary gains from the depression. Many of the wealthiest families and individuals in the US and Europe were formed during the Great Depression. While only a few truly made their dollars during the deflationary years, they acquired ownership and increased their position in their industries which bore fruit in the boon years following the depression.
Some who had hoarded their money took advantage of their peers who had lost everything in the stock market and bought their competitors businesses and assets for pennies on the dollar. Some went from being an average player in an industry to becoming the last standing proprietor and became an instant monopoly on the economic rebound.
The majority of the wealthiest families in the US and Europe either became so or stayed the elite because of how they capitalized on the Great Depression. The goal of the ultra wealthy is for as much money to go into as few hands as possible. It is hard to imagine a better time for this to happen then during a deflationary depression where there are so many losers and so few winners.
So the following are three of the top reasons why the ultra wealthy would want a deflationary depression, and how they would benefit from this environment.
1) The wealthiest can greatly increase their percentage of total global wealth
As stated above the most monetarily ambitious individuals and families who are hoarding billions in cash could buy entire sectors of the economy such as falling real estate and failing businesses for pennies on the dollar. Initially this investment would just increase their percentage of ownership and position, but would pay off big time when the economy rebounds.
Also those hoarding cash relative wealth sky rockets during deflation. Even if they stood pat their billions or even millions become more powerful and impressive as their peers and the global economy shrinks. When trillions of dollars evaporate out of real estate and the stock market those who maintain their wealth become wealthier in comparison. If I have 200,000 in a bank with deposits in the billions I’m not a very big depositor, but if due to losses in real estate and stocks the banks deposits shrink to a few million dollars than my 200,000 suddenly looks quite respectable.
2) Those who want a global economy could achieve it much quicker.
George Bush Sr. was the first president to talk to the public of globalism from the perspective of a “world order”. This global economy is hierarchical and the polar opposite of a global community. In the “new world order” the bulk of wealth and ownership is in hands of the few and the masses stand to benefit by this is the typical “trickle down economics” that has dominated US fiscal policy since the Reagan years.
In this view the entire globe is one homogeneous functioning economy. The greatest obstacle to this dream is the disparity of income and standard of living between the industrialized nations (mainly US, Japan and Europe) and the rest of the emerging and third world nations. This disparity can be rectified in two basic ways, either the income and wages of the industrialized come down or the emerging nations can come up. The most likely scenario is a combination of the two.
Yet, this economic leveling process could take decades. It’s hard to imagine the wealthy globalization zealots being comfortable with this rather lengthy process which hampers their economic dreams and goals. Patience is not one of the strong points of the economically ambitious.
The quickest solution for globalism is probably found in a deflationary depression centered around industrialized nations. In the last depression the old powers England, France and Germany had to borrow from an emerging nation (the US), and by the end of the depression the US not only caught up but surpassed the wealth and power of the aging empires.
Currently the US is the aging empire borrowing from the creditor emerging nation China.
In a deflationary depression wages in the US and Europe would fall as would the standard of living of the middle class. This fall would be rather dramatic and could allow global wages to meet in a rather short period of time. The emerging nations wages would not fall as much and may even rise during the deflation and would certainly be able to catch up almost instantaneously as the global economy begins to recover.
Just as a few of the wealthiest families in Europe were able to not only survive the shift of power from Europe to the US but actually flourish so will our current ultra wealthy families be able to survive any future geographical shift of economic power. After all, it is called globalism.
3) The corporate economic elite can unload their economic burdens and obligations.
Many of the largest corporations and governments now find themselves swamped in financial obligations they’ve made to their workers and citizens. Though most of these contracts were mainly constructed by management and sold to labor as a bargaining agreement, the corporations like to pose these contractual obligations as “entitlements”. While it is literally true that the workers are contractually “entitled” to these retirement and benefit plans the corporate PR departments are busy waging an image war over the perceived emotional meaning of entitlement.
Every day we are inundated with reports describing the ill effects of how adults and kids “feeling entitled” is injuring our economy and society. Every day we here how these spoiled brats who feel entitled to life’s luxuries are ruining the moral fabric of our humanity. Yet, feeling entitled and being entitled aren’t the same thing. If I work a job I am entitled to receive a pay check for the agreed upon amount for my services. It’s not about feeling entitled its about my boss living up to his word and obligation and giving me my paycheck.
Despite their best efforts the corporations, though getting some some unwarranted sympathy for their plight, is still swimming in a sea of debt. Their reckless investment and business practices are leaving them ill prepared to fulfill their retirement obligation to all their workers.
The investment menus of most corporations and businesses are quite limited. Couple this with the fact that interest rates are being kept at historic lows for a number of years is forcing companies and individuals to put greater and greater portions of their retirement plan funds in the stock market. Trillions of dollars were lost globally during last fall and this spring’s stock market tumble and on-going real estate correction. Many people found their self-managed and corporate managed retirement funds cut in half.
The stock market plunged some 87% during the last depression. There is every reason to believe that another depression would be as severe. In such a case near 90% of all retirement funds could evaporate, and with it so would the financial obligations of many of the world’s largest corporations. Looked at inn this way a deflationary depression might be the only way for a number of corporations and industries to be able to survive.
I’m not saying that a deflationary depression is being planned. Yet, I think it is unwise to be blind to the fact that some have and some would greatly benefit from a deflationary depression. These include the wealthiest of the wealthy, and the most powerful of the most influential. A deflationary depression not only solves their problems, but helps them reach their goals and dreams in the quickest and most powerful means available. A means that only comes about once a century of so, at least that’s what history has shown us.
But if you think that they are more concerned about your immediate welfare than their success and overall ability to impact the world, then maybe they will do everything in their power to avoid a depression.
Jim Guido
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