Debt contractions are inherently deflationary, and those who are prepared for them can pick up a lot of cheap assets. From Zeus Yiamouyiannis at oftwominds.com:
The gravy train will have to stop at some point, but right now the global elites have pushed their chips on to the U.S. dollar and stocks.
Editor’s note: This is a guest post by my friend and colleague Zeus Yiamouyiannis, Ph.D., who has contributed essays to Of Two Minds since 2009.
I believe there will be a massive contraction/deflation in the near term in certain sectors of the U.S. and world economy as demand flees from commercial real estate, as jobs do not come back full force, small businesses close down, and/or people migrate to home offices. Demand for residential real estate will also likely contract in the short term as people are forced to go into living with family or shared housing. Even with the money-pump operating at full speed, flooding the market with cash (which should cause inflation), there will be an opposite effect for the ordinary person.
Why? There are tons of people with no actual money to buy up, lease, or rent real estate assets. Cash and borrowing collateral is tilted so much to super-wealthy, that the vast majority of people will not have access to cash to invest in real estate and other durable goods. Far fewer ACTUAL PEOPLE can pursue certain goods even if the SYSTEM is flooded with cash. It’s not in their pockets!
Now this might be partially corrected by some form of Universal Basic Income (UBI), but this will take time, and people will initially use it to shore up their survival. I look at what happened in real estate after 2006, where it crashed and was successfully hyperinflated again. Ordinary people lost their homes, and private equity firms bought them up with cash and re-inflated the real estate bubble. Look at what has happened to gold, which should be $4,000 to $5,000/ounce right now, but manipulation of gold paper (and selling gold “assignments” over actual gold) has kept a kibosh on its meteoric rise.
One should not underestimate how much the global elite has tied the welfare of a fearful global populace into their own program and benefit. They are using an intensely immoral extortion (and should be illegal, but it is in fact rewarded) that says, “We get ours first, and you might get some scraps… We don’t get ours first (and most) and you get NOTHING! Yes, it is a bullying tactic that would create revolution if they ever acted upon, or we ever called them on it (and I hope we do) but current retirees are also very powerful and they firmly toe the line with the status quo. They have enough of the loot to want to protect it and keep a broken system going.