And I don’t mean an earthquake…
By Morf Morford
Tacoma Daily Index
I’ve been a student of recessions, depressions and recoveries for decades.
My parents went through what was called The Great Depression (approximately 1929-39).
My “education” of such things was largely involuntary, but it was also continuous and immediate.
The advent of recessions in my adult life only confirmed the seriousness and necessity of “recession-proof” investments.
There are not many – and even those are not fool-proof as the dynamics of any given economic decline are always in flux.
In some downturns, gold is the safest investment. In others, gold is as worthless as anything.
In some economic crises “cash is king.” Other times credit, even debt, is a safe haven.
One book I have read recently posits that real property (like land) and art are the best investments.
If you follow the upscale art market auctions, art is selling at record highs.
Other than further proof that those with immense wealth have even more than they could spend on practical things – or that they could easily pay a fairer share of taxes – I don’t see vastly inflated art prices as anything like an economic indicator – at least of oncoming recession or depression. But it is yet another indicator of sheer economic inequality – but that is another topic entirely.
“The stock market hates uncertainty” – as does any business (except those who have learned to profit from instability and chaos).
A standard business needs to plan at least a few years out – five or so years at least – for most.
The standard costs of doing business factor into every decision from location to hiring to product development.
When prices and conditions change – or promise to be even more unpredictable – planning for the future becomes a fool’s errand.
Unstable interest rates or erratic market forces (like tariffs) can send the best-laid business plans into the round file.
There are two sets of ironies about recessions and depressions; their causes and their predictability.
Recessions and depressions occur with depressing regularity (at least in the American economy) about every ten years – as if they are an aspect of an inevitable cycle of nature like cicadas emerging.
But there is nothing “natural’ about recessions. They don’t ebb and flow with the seasons – but the economy does expand and contract on the reach and contraction of investment and debt – the practical expression of hope or fear in the immediate future.
Financial manipulations – or resource speculations – whether it be oil, gold, silver or steel – distort the standard (and relatively reliable) market forces of supply and demand.
Financial “panics” are a disaster for most of us – but not for those who set them in motion and profit handsomely.
For a quick review, in a financial panic, something of an established value suddenly increases – or decreases – in value on a scale unimaginable just a few weeks before.
Oil, gold (even tulip bulbs) take on an importance monetarily inconceivable in a sane and stable marketplace. (1*)
But as history shows, combine fear, greed and the greater fool theory (the premise that someone will pay even more than you did for any given product) and mix in any product – real or imaginary – from land to Bitcoin – the stage is set for the inevitable investment, bubble, panic and collapse that seems to recur about every ten years.
If you mix in international tensions, erratic and oblivious heads of state or natural disasters (like hurricanes, earthquakes or weather disruptions) the stakes are even higher.
I don’t want to raise too much alarm, but the conditions we face in the late 20-teens are, by any objective standard, more extreme and unforgiving than any other previous economic crisis.
We have been in what might be called a rolling pre-crisis mode for years. Even without a recession, in fact by standard measures, we have been in a “recovery” for almost ten years, yet we find ourselves in a state of “misery” represented by record levels of drug abuse (and lethal overdoses), suicides and homelessness. (2*)
What I find so interesting is, Herbert Hoover in August 1928 said no country in the world was closer to abolishing poverty than the United States. And then, of course, we had the Great Depression. – Robert Dallek, political historian
Mix in never before seen variables like erratic weather patterns that interfere with food production and transport, plastic nano-particles in our food supply (and blood and feces) anti-biotic resistant bugs and toxic contaminants in everything from our salads to our water supply, we have the active ingredients for a crisis like never before. (3*)
No wonder we have a burgeoning market in survival structures and supplies. (4*)
If you remember way back to 1999, the media was abuzz with dire projections about Y2K and the panic and inevitable economic collapse of North America and Europe – especially the technology sectors.
The advice back then was simple – buy gold, guns and honey.
That might have been good advice for a certain category of cultural collapse, but it could not have been more irrelevant for the non-event that was Y2K.
Whenever our next financial collapse happens, it will not look like the ones we have had before. We have too many moving parts, too many variables that may, or may not, have dramatic impacts.
Will we have runaway inflation? Possibly. We have several of the historic precursors like rapidly expanding national (and personal) debt.
Will we have deflation? (Where prices decline and shoppers put off buying until the prices are even lower)
Many economists would say that we are already there.
How about “stagflation,” that strange paralysis of the economy that gave us the infamous “malaise” in the late 1970s?
We have features of that too.
In fact you could argue that we have almost every characteristic of economic implosion looming in front of us right now.
Which brings me to the second irony of most – if not all recessions and depressions – their predictability.
Some economic indicators are obvious – or at least they are obvious in retrospect.
The 2008 Great Recession hit the business community by surprise – at least if you look at business magazines in the fall of that year. Or documents from WAMU or Lehman Brothers.
But on the other hand, who didn’t see it coming?
The evidence was accumulating by the day that the housing bubble was about to pop – and with it the whole industry of credit default swaps and a raft of other questionable (though usually “legal”) financial “instruments.”
The evidence is also accumulating now. Who of us has not seen nearly endless parade of articles in every mainstream business magazine that a recession or depression is (or isn’t) on the horizon?
I see that as a health sign – at least people are paying attention this time.
An economic inversion may not come immediately, but it is certainly inevitable.
I don’t think I’d recommend stocking up on guns, gold or honey, but I would suggest that we all be a bit more prudent and observant.
Something unexpected is definitely on its way.
As for me, I’m investing in health, family and friends. They will get us through any crisis.
(1*) For a short overview of the tulip bulb bubble, panic and collapse you may begin here: https://www.focus-economics.com/blog/tulip-mania-dutch-market-bubble
(2*) Largely thanks to new “designer drugs” like fentanyl and Sufentanil.
(4*) From hurricanes to atomic warfare or the zombie apocalypse, you can escape it all here – https://www.atlassurvivalshelters.com/.