Are You Ready For An Inflationary Depression?

By: Tom Chatham

We are heading into a new depression. It is not coming. It is already here but we are only in the beginning so it may not be easy for many people to see just yet. Once it is easy to see it will be too late for any meaningful actions to mitigate the effects. Just as you must prepare for a tornado ahead of time, you must prepare for economic conditions early.

We have 20 trillion in debt, over 200 trillion in unfunded liabilities and over a quadrillion in derivatives held by the banks. Our GDP is only about 17 trillion a year and world GDP is only about 60 trillion. It does not take a math wiz to realize that even if we are not paying any interest at all on this massive debt, there is no way to ever pay it all back short of some type of default.

That is what depressions do. They wipe out all of the misallocation of resources and bad debt and provide a reset for the economy. These resets can be relatively easy or they can be very destructive depending on the amount of misallocation that is present in the system. The amount of debt, brought on by decades of unrestricted credit creation, is the largest in history. That means we are in for a very bad ride in the near future.

Much of the money that people think they have is really only made up of digits in some computer somewhere. The banking industry has already taken this money for its own use. To eliminate the need to ever give it back to the rightful owners they must destroy these digits. That is what the new bail-ins are all about. They can at some point just wipe all of those digits out of existence and say tough luck suckers.

The depression of the 1930’s was a deflationary one in nature. People lost their jobs, prices fell and cash was king. People holding bonds did very well. In an inflationary depression, prices rise, people will get paid in increasingly worthless paper and bonds will collapse. Banks will enact bail-ins to stay solvent and people will go broke while holding piles of cash.

In the end the inflationary depression will end with the currency collapsing and people losing everything they have that is not fully owned. Eventually we will see deflation as prices fall due to the destruction of the monetary system. At this point most people will be financially devastated. Those that make it to this point with their wealth in tact will be the new wealthy class.

So how can a person survive something like this? You simply need to focus on the needs of your family over this period of time. If you can provide the needs of your family regardless of the prices at the time, you will make it through the worst of times, This means you need a plan to provide these items to your family whether prices are rising or falling. If you have a years supply of food, it does not matter what the current price is, you will have the means to feed them.

If your home is paid for, your car is paid for and you have a supply of energy or a way to produce it yourself, it will not matter to you how fast prices are changing or how much money you bring home every week. You will be able to live outside of the rapidly changing economy. The rapid changes that will destroy others will only provide you a glancing blow.

Those that survive on credit will be devastated as their access to credit is cut off and they become unable to continue making payments on their possessions. They will be devastated even if they still have a paying job. For those that expect to survive on their savings and pensions, they will find those accounts empty following any bail-ins.

Where you live will also play a major role in how well you survive the depression. What do you think will happen when those dependent multi generational families lose their welfare and food stamps following the breakdown of the credit system and prices rise faster than benefits? The ability to produce some items yourself will also depend on your location and the ability to stay safe.

The whole of the production and distribution system depends on 30 day credit. When the credit system ceases to function, goods will stop being produced and transported. This will lead to high prices and few goods to buy. So even if you have a bag full of money you may not be able to buy what you want at some point.

Just like a tornado that tears through a community, a depression can leave the people without the resources they need unless they have them hidden away safely for future use following the event. This is why having resources, real physical goods, put away now will allow you to thrive when the system fails. When the system resets, you will not get a second chance to do it right. You only have one shot and that requires you to finalize your preparations now while you still can make a difference.

The whole point of preparing for this type of upheaval is to maintain a standard of living that you find acceptable. Lack of preparation in this type of event will likely find you living much poorer than you would like. If you are successful in maintaining your standard of living and preserving your wealth throughout this event you will have won the battle and set yourself up for a better future when things stabilize.


Posted on January 23, 2017, in Commentary, Economics, Preparedness and tagged , . Bookmark the permalink. 18 Comments.

  1. I don’t know what to believe. Though we’ve amassed the largest mountain of debt in the history of the world it seems that it just doesn’t matter. I had thought that by now we’d be in the throes of a depression. And now with Trump in office it seems that there’s a lot of optimism regarding the economy. Companies have promised to create jobs here in the U.S. or bring jobs back to the U.S.

    • You have to live for today but prepare for an uncertain tomorrow. While it appears Trump wants to do the right thing, it is 10 or 15 years too late to change the outcome at this point. His actions may be positive for a while but the die is cast. No paper currency has lasted indefinitely in all recorded history and ours is no different. Printing will destroy it at some point it just remains to be seen how long they can keep the scam going.

    • Same thing happened in the 80’s, surge on inflation, unemployment. In the early 80’s we had to relocate out of state along with several others we knew for jobs. Not many raises now incl gov. jobs and pensions, military, no SS raises either for most. People will have to shop sales and clearance items, use coupons. Having kids is a luxury for the wealthier classes, as women need to work full time, incl us before retirement.

  2. Words like stagflation and slow growth may be the cornerstone of the global economy for years to come

  3. I tend to agree….but I also would have thought it would have happened 10 years ago. It’s like no one wants to be the one to call BS because it would point out their empire has no clothes either, or they are sitting on a huge pile of US paper they don’t want devalued overnight.

  4. This is as concise a description of our current ( and coming ) malaise — and the prescription for surviving it well — as I have ever read. Good job, Tom.


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