Inflation or Deflation?

Occassional I get questions on the differences between inflation and deflation as it relates to it affecting the economy, causing a economic collapse and therefore regulating people to daily survival. I struggle to explain either and am much better at explaining the effects. Kinda like explaining a sharp stick jammed into your eye,........I can't explain the medical effects other than the fact that it would subsequently hurt like hell, affect your vision and depth perception, and maybe be a cause for life threatening infection.

Then along comes this good article from Tyler Durden on Zero Hedge. Titled "Will It Be Inflation Or Deflation? The Answer May Surprise You", this article is easy to read and understand and may give the prepper some ammunition to explain causes and effects as it relates to the need to prepare for a collapse. The enitre article with graphs and charts cane be found on Zero Hedge.

Is the coming financial collapse going to be inflationary or deflationary? Are we headed for rampant inflation or crippling deflation? This is a subject that is hotly debated by economists all over the country. Some insist that the wild money printing that the Federal Reserve is doing combined with out of control government spending will eventually result in hyperinflation. Others point to all of the deflationary factors in our economy and argue that we will experience tremendous deflation when the bubble economy that we are currently living in bursts. So what is the truth? Well, for the reasons listed below, we believe that we will see both.

The next major financial panic will cause a substantial deflationary wave first, and after that we will see unprecedented inflation as the central bankers and our politicians respond to the financial crisis. This will happen so quickly that many will get "financial whiplash" as they try to figure out what to do with their money. We are moving toward a time of extreme financial instability, and different strategies will be called for at different times.

So why will we see deflation first? The following are some of the major deflationary forces that are affecting our economy right now...

The Velocity Of Money Is At A 50 Year Low

The rate at which money circulates in our economy is the lowest that it has been in more than 50 years. It has been steadily falling since the late 1990s, and this is a clear sign that economic activity is slowing down. The shaded areas in the chart represent recessions, and as you can see, the velocity of money always slows down during a recession. But even though the government is telling us that we are not in a recession right now, the velocity of money continues to drop like a rock. This is one of the factors that is putting a tremendous amount of deflationary pressure on our economy...

The Trade Deficit

Even single month, far more money leaves this country than comes into it. In fact, the amount going out exceeds the amount coming in by about half a trillion dollars each year. This is extremely deflationary. Our system is constantly bleeding cash, and this is one of the reasons why the federal government has felt a need to run such huge budget deficits and why the Federal Reserve has felt a need to print so much money. They are trying to pump money back into a system that is constantly bleeding massive amounts of cash. Since 1975, the amount of money leaving the United States has exceeded the amount of money coming into the country by more than 8 trillion dollars. The trade deficit is one of our biggest economic problems, and yet most Americans do not even understand what it is. As you can see below, our trade deficit really started getting bad in the late 1990s...

Wages And Salaries As A Percentage Of GDP

One of the primary drivers of inflation is consumer spending. But consumers cannot spend money if they do not have it. And right now, wages and salaries as a percentage of GDP are near a record low. This is a very deflationary state of affairs. The percentage of low paying jobs in the U.S. economy continues to increase, and we have witnessed an explosion in the ranks of the "working poor" in recent years. For consumer prices to rise significantly, more money is going to have to get into the hands of average American consumers first...

When The Debt Bubble Bursts

Right now, we are living in the greatest debt bubble in the history of the world. When a debt bubble bursts, fear and panic typically cause the flow of money and the flow of credit to really tighten up. We saw that happen at the beginning of the Great Depression of the 1930s, we saw that happen back in 2008, and we will see it happen again. Deleveraging is deflationary by nature, and it can cause economic activity to grind to a standstill very rapidly.

During the next major wave of the economic collapse, there will be times when it will seem like hardly anyone has any money. The "easy credit" of the past will be long gone, and large numbers of individuals and small businesses will find it very difficult to get loans.

When the debt bubble bursts, cash will be king - at least for a short period of time. Those that do not have any savings at all will really be hurting.

And some of the financial elite seem to be positioning themselves for what is coming. For example, even though he has been making public statements about how great stocks are right now, the truth is that Warren Buffett is currently sitting on $49 billion in cash. That is the most that he has ever had sitting in cash.

Does he know something?

Of course there will be a tremendous amount of pressure on the U.S. government and the Federal Reserve to do something once a financial crash happens. The response by the federal government and the Federal Reserve will likely be extremely inflationary as they try to resuscitate the system. It will probably be far more dramatic than anything we have seen so far.

So cash will not be king for long. In fact, eventually cash will be trash. The actions of the U.S. government and the Federal Reserve in response to the coming financial crisis will greatly upset much of the rest of the world and cause the death of the U.S. dollar.

That is why gold, silver and other hard assets are going to be so good to have in the long-term. In the short-term they will experience wild swings in price, but if you can handle the ride you will be smiling in the end.

In the coming years, we are going to experience both inflation and deflation, and neither one will be pleasant at all.

UrbanMan 's comments:  While to some investors having cash on hand, and I mean in your safe, is not a wise way to have money work for you, but is averages the effects of several posibilities,..inflation and deflation, bank closures, ability to purchase items in the early days ot a total collapse until paper fiat currency isn ot accepted.   

Neighborhood Gardens and Survival Growing

Someone one sent me the poster (at top left above) depicting the differences in urban living between the U.S. and Switzerland. But there is a glimmer of hope for the U.S., between the bad news of drought and other natural disasters affecting our agricultural capability as well as the propensity of smaller farms to  be sold off to either larger farms or suburban development groups,...... there is a growing urban/suburban gardening/farming movement that is good for many reasons......

1 -  Growing your own vegetab;es will teach and provide growing experience to people who otherwise would not get it.  This increases these people's chances of long term surival in a decayed society if they can make it to the point where they can grow crops for survival and bartering.

2 -  The more people in the inner cities growing crops are less people that are shooting and looting.  Seriously, imagine some overall shithole like Detroit where large city blocks can be converted to urban farms and inner city youths diverted from criminal enterprises to something that actually has some value.  I know, it's a pipedream - much more money in drugs, but nonetheless one can hope.

My survival group....and again, we are a loose knit group, sharing information, support and planning, with the overall plan to consoldiate when the need arises.....anyway, my survival group took a hit the other day when we found out we are losing out most experienced and talented grower.   One of our eight families, who plan on bugging in together in one of two suburban locations, is now moving. The good news is that they will be moving to a farm located on the edge of suburban sprawl but they do have a decent moving body of water and two ponds on the property. This will be an option for Bug Out for the remaining seven families as it is within one long day's unencumbered movement via vehicles and possible movement by foot within one week. However the bad news is that the majority of our vegetable - farming growing expertise is leaving with this family. We all probably know someone who we say has a "green thumb" and their counsel is valuable to address all manner of issues relating to growing food. 

Two of our member families,...and one is me,...had started and lost iterations of vegetables already this year. The only good thing is that the year is early enough to re-plant but we move our timeline for harvest back a month.....maybe six weeks.   If this was a SHTF situation and we needed those vegetables to eat then we would be up shit creek without the proverbial paddle. But I guess that's what we stock bulk, canned and survival foods for the hard times.

In the e-mails I receive relating to growing our own food for survival, I received a tip from a reader who used a home improvment chain store gift card to purchase several rolls of various types of small mesh fencing both for his or his neighbors future growing needs or for barter.

While I have four rolls of common barb wire fencing stored away, I made a mental note to do the same as this mesh fencing is not only useful for fencing in gardens and protecting them from varments, it is useful to create obstacles that can be use to slow up or deny entry and/or force channelization for defensive purposes, or even create holding areas for livestock.

Back to growing food,...................the ability to grow your own food is going to be not only a huge asset but most likely the difference between survival or not.  The below article, entitled "America the Vulnerable - History warns we're sleepwalking towards collapse", by James H. Kunstler was published on Peal Prosperity.


Food production system in the Soviet Union had been so direly mismanaged for so long – most of the 20th century – that a whole counter-system of work-arounds had been established in the form of nearly universal household gardening. Even families who lived in the ghastly Modernist apartment slabs of Moscow had access to garden plots in the vast un-suburbanized Russian countryside, and they could get there on public trains and buses. The more privileged had dachas ranging from humble shacks to fancy villas, each with a garden. The Russian people were used to the necessity of growing their own food and had the skills for preserving it to offset the idiocy of the official distribution system in which citizens wasted whole days waiting on line for a cabbage, only to be told they had run out.

When the Soviet system collapsed, the effect on society was far less than catastrophic, perhaps even salutary, because a large cohort of people with an interest in growing food, who formerly only pretended to work in dismal bureaucratic jobs, were now available to reoccupy and reactivate the de-collectivized farming sector that had been a drag on the Russian economy for generations.  After a period of adjustment, one thing was self-evident: no more lines at the Russian grocery stores.

By contrast, in the U.S., even farmers don’t have kitchen gardens. This is not a myth. I live in an agricultural backwater of upstate New York where dairy farming modeled on industrial agri-biz reigned for decades (it’s in steep decline now), and as a rule, the farmers do not grow gardens.

When even farmers don’t grow any of their own food, you can bet that a lot of knowledge has already been lost. American supermarkets operate on a three-day resupply cycle. The system is much more fragile than most Americans probably suppose. My guess is that few even think about it. The resupply system has never failed, except briefly, in localities hit by natural disasters. However, a financial crisis could cripple the food distribution system of the entire nation. Truckers who don’t get paid won’t deliver. Trouble in the Middle East oil nations could provoke an oil crisis – something we haven’t experienced since the 1970s.  There are many ways for this complex system to fail – the point being that when it does, there will be no backup, as was the case in the former Soviet Union.

SHTF Alert: Real Life Zombies

How many of us Prepper's like a good Zombie story? In fact, you don't even have to be a prepper to enjoy these type of story lines - look at the popularity of the television series "The Walking Dead".  Soon the movie industry will be releasing the movie "World War Z". However, if you are reading this you are probably like me, hardly able to watch these movies as the actors make mistake after tactical mistake. My wife always cautions me, "Honey, this is just a show,....besides Zombies aren't real". Riiiiiight, on both counts, but still,...........

This story came out on the web about a medical syndrome called "Walking Corpse Syndrome".  Before it's al said and done, we may see more of these people, walking slowly up the urban streets and suburban roads.

Man Describes Life With 'Walking Corpse Syndrome'

A man's account of living with Cotard's syndrome offers a chilling look at a rare condition that has patients convinced they're zombies.

The man, identified only as Graham in an interview with New Scientist, said he awoke from a suicide attempt feeling as though his brain were dead.

"I just felt like my brain didn't exist anymore," Graham told the magazine, recalling his bizarre state of consciousness after surviving an attempt to electrocute himself in his bathtub. "I kept on telling the doctors that the tablets weren't going to do me any good, because I didn't have a brain. I'd fried it in the bath."

Graham was diagnosed with Cotard's syndrome, a mysterious psychiatric condition marked by "the fixed and unshakable belief that one has lost organs, blood or body parts" or has no soul, according to a definition in a 2003 report in the journal Neurology.

"I lost my sense of smell and taste. I didn't need to eat, or speak or do anything," Graham told New Scientist. "I ended up spending time in the graveyard because that was the closest I could get to death."

What little is known about Cotard's syndrome has come from rare case reports dating back to 1882. But Graham's recent diagnosis gave doctors an opportunity to look inside the brain of a Cotard's patient.

What they found was extraordinary.

"I've been analyzing PET scans for 15 years, and I've never seen anyone who was on his feet, who was interacting with people, with such an abnormal scan result," Dr. Steven Laureys of the University of Liège in Belgium, who consulted on Graham's case, told New Scientist. "Graham's brain function resembles that of someone during anesthesia or sleep. Seeing this pattern in someone who is awake is quite unique to my knowledge."

So while Graham's brain was intact, his brain activity looked like that of someone in a coma.

"It seems plausible that the reduced metabolism was giving him this altered experience of the world, and affecting his ability to reason about it," Laureys said.

Graham said he struggled to find pleasure in life, calling the fact that he didn't actually die "a nightmare."

"I just felt really damn low," he said, recalling his desire to lurk in graveyards. "I just felt I might as well stay there. It was the closest I could get to death. The police would come and get me, though, and take me back home."

But over time, with the help of therapy and medication, Graham said he managed to shake his zombie-like state.

"I don't feel that brain-dead anymore," he told New Scientist. "Things just feel a bit bizarre sometimes."

"I'm not afraid of death," Graham added."But that's not to do with what happened - we're all going to die sometime. I'm just lucky to be alive now."

From SHTF Plan: 35 Excuses that will doom the Non-Prepper

Another excellent article from SHTF Plan.  Who gets my vote as the best SHTF related site on the web.

I think this article serves several purposes,..provides a platform to send to some one who is on the fence about prepping at any level and also kind of motivates you to keep moving forward. 

Incidentally, I'm reading a story about a family who was pretty well prepared for the collapse (caused by a pandemic) but nonetheless ended up collecting strap hangers who provided varying degrees of skills (and burdens) but had to rely on the prepper for food both stocked supplies and the ability to grow vegetables.   I have always said this will happen - be it relatives or friends, even neighbors.   One would have to evaluate each case on the merits of what they can provide the group and if that is not much, how do you go about actually not allowing those persons into your group?  A friend denied is most likely a new enemy.

As of today it is estimated that ONLY 1% of the population actually goes to much of any effort to prepare and store up enough of what they need to survive a true calamity. This means a huge majority of the population fails, yes fails, to have much of anything if and WHEN what they need each day to live evaporates quickly.

Most people have no clue what life will be like after the grocery stores close. They simply cannot grasp the horrors that will befall those people that have not put away for tomorrow or prepared contingencies for life threatening emergencies. Instead of taking some time, effort , and money to safeguard themselves and their families, they have a wide array of reasons (excuses) for why prepping is crazy and not at all necessary.

There exist a magnitude of what are called TRUE civilization altering or world-as-we-know-it ending events that could happen. Many have already occurred throughout history, as well as within just the last decade. The fact is , it's only a matter of time before these catastrophes happen again. People who choose not to prepare for their families will be faced with life and death situations that few have ever experienced before.

Without water people will die within a few days. Without food people will die within a few weeks. Without everyday necessities people will die in hordes from varying ailments and diseases. Without what they are accustomed to on a daily basis, people will suffer and most will die. This absolutely does not have to happen to such a high percentage of the population, but sadly it will unless more people understand there is no real excuse for NOT preparing.

The following are 35 of the most common excuses and causes cited by the 99% of the population who don't prepare.

1. Oh come on, it is never going to happen, my area is safe, I am safe.

2. I am convinced that everything is recoverable and my area will get back to normal quickly.

3. No matter how horrible it is, help will eventually come, I just have to wait it out.

4. Even if something happens, there are plenty of food and supplies for everyone in my city.

5. My state government, my community, my neighbors will not abandon me and let me starve.

6. I have a 3 day supply of food, the government and others tell me that this is plenty.

7. I have lots of credit cards, I will purchase anything I need in my city or nearby cities.

8. My water faucets will have water, even if it is temporarily shut off, they will not let us go thirsty.

9. There is no room to store supplies that will never be used anyway.

10. I can't rotate supplies, everything will get old and have to be thrown away.

11. I don't have extra money to store up anything for disasters.

12. It is too much work to bother with.

13. I have absolutely no idea what to store or how much.

14. I don't need any protection after a disaster, the police, National Guard, military will protect us.

15. The power grid will come back on, until then I have LED flashlights that last forever.

16. Again and again I hear these fear mongers exaggerate the threat level, another false alarm.

17. I have a good car and family in other areas, if anything happens I will just go stay with them.

18. I work all week long and I am going to spend my extra money on fun rather than fear.

19. Survival supplies taste bad, I can't live on this for long at all.

20. If a true catastrophe occurs we are going to die anyway, besides that I don't want to live through it anyway.

21. Survival and prepping for the worst is negative, as long as I stay positive, only the positive will happen.

22. Preppers / Survivalists are radical, paranoid, conspiracy driven out of touch with reality, I don't want anything to do with them.

23. I don't know why everyone is so worried, times are better and safer now than ever in human history.

24. There is so much to prepping, I'll take my chances that nothing will happen.

25. All my investments go right into what makes me money and gives me security for the future.

26. Why bother storing up that much food and supplies, mobs will just come in and take it.

27. I have a refrigerator and a cupboard full of food, 2 cases of water, a 12 pack of toilet paper, I am all set.

28. If something happens I will just run to the grocery store and stock up before it closes.

29. If we become sick after a disaster we have good medical treatment centers that will care for us.

30. Nothing is as bad as it ever seems, stop overblowing everything as doomsday.

31. If disaster strikes everybody will band together and save the day.

32. People have become way too civilized to wage a world war and take what you have and act like savages.

33. There are food banks and emergency preparedness places nearby to me, they will take care of us.

34. FEMA , the Red Cross, and other government agencies are huge and have the whole country backing them.

35. I can always wait until tomorrow to start prepping, there is always time.

Important. To read the Fact/Answer to each response, please click on the link to SHTFPlan.com