Posted on 05/02/2022 7:18:50 AM PDT by Diana in Wisconsin
All of these similarities and differences are setting up a sea-change revaluation of capital, resources and labor that will be on the same scale as the extraordinary transitions of the 1920s and 1970s.
The awakening of inflation after decades of slumber has triggered a flurry of comparisons to the 1970s accompanied by a chorus of projections for 1970s-type stagflation, defined as inflation plus economic stagnation-- limited or negative growth and high unemployment.
A less popular comparison is with the 1920s: a massive expansion of debt, an equally massive speculative bubble in assets and extreme wealth-income inequality, all against a backdrop of slowing growth and debt saturation.
Each of these eras shares certain characteristics with the present, but beneath the surface there are consequential systemic differences. Let's start with the 1970s.
The oil shock that fueled inflation had two sources: 1) the oil-exporting nations took control of their hydrocarbon resources and repriced them in the context of 2) declining reserves and production in the West, particularly the U.S., which had been the Saudi Arabia of the world through the 1930s, 40s and 50s.
A second, much less understood dynamic was the immense investment required to clean up the U.S. industrial base. Pollution in the U.S. was out of control by the early 1970s, with toxic rivers catching fire and high levels of air pollution. The oil shock prompted federal regulations on pollution and improvements in the basic efficiency of appliances, vehicles, etc.
This was a major sea change for the entire industrial sector, and it required immense investments of capital and a painful learning curve. This diversion of capital depressed profits and acted as an economy-wide tax on the system. In today's money, the overall cost of this transition was in the trillions of dollars.
The debt levels in the 1970s were by today's standards absurdly modest. The cultural values of frugality and avoidance of debt still held, and there was resistance to heavy public-private borrowing that has completely vanished.
The demographics of the 1970s was also completely different from today. The 65-million strong Baby Boom generation was entering the workforce and starting families and enterprises. The demographic double-whammy was the mass entry of women into the workforce as opportunities and ambitions expanded.
Meanwhile, the energy picture was brightening under the radar as the development of newly discovered super-giant oil fields in Alaska, the North Sea and Africa began. It took many years to bring these new hydrocarbon sources online, but by the mid 1980s, the price of oil had fallen to lows that slashed the income of oil exporting nations, including the Soviet Union.
None of these conditions are present today. Much of America's domestic production was offshored in the past 20 years, the demographics are no longer as favorable (soaring population of elderly and flatlined workforce) and the production from the super-giant fields brought online in the 1970s is declining. There are no new super-giant fields in the global pipeline to replace those in the depletion phase of declining production.
As for the 1920s: the parallels are debt saturation and speculative excess against a backdrop of an economy that feasted on debt-fueled spending and speculation while absorbing new technologies.
The differences are the U.S. still had immense natural resources and relatively limited infrastructure in the 1920a. While private debt was through the roof--$100 in a stock market account leveraged $900 in stock purchases due to the 10% cash margin requirement--federal debt was still modest compared to modern levels.
This set the stage for massive expansions of federal debt in World War II that funded sustained investments in infrastructure through the 1940s, 50s and 60s.
In the present, we have all the fragilities of the 1920s and few of the strengths. We have all the debt saturation and speculative bubble excesses but our resources have been heavily tapped and every sector of the economy is heavily indebted.
All of these similarities and differences are setting up a sea-change revaluation of capital, resources and labor that will be on the same scale as the tumultuous transformations of the 1920s and 1970s.
We're in uncharted territory.
*Charles Hugh Smith Ping*
“In the present, we have all the fragilities of the 1920s and few of the strengths. We have all the debt saturation and speculative bubble excesses but our resources have been heavily tapped and every sector of the economy is heavily indebted.”
We now have a perfect storm brewing. The Northern states are going to experience a home heating energy crisis beginning in a few short months, a pricing crisis like we have never experienced. Instead of boosting production now, Politicians are talking about printing more money to handout in the form of energy welfare stipends - it's going to be an epic crisis.
Maybe we’re headed for the German economy of the early 1920s and the German politics of the 1930s. All at the same time.
And your thought is what is almost if not an absolute
As someone once said, history doesn't necessarily repeat, but it does often rhyme (and keeps a steady tempo, apparently).
It has been clearly outlined, in the book Nineteen Eighty-Four, and the Biden administration is following it carefully.
The Ministry of Truth is the DHS “Disinformation Governance Board”.
The Ministry of Plenty, while not officially named yet, is in charge of the Recession and orchestrated fuel, fertilizer and food shortages.
The Ministry of Love has also not yet been formalized, but it is trying out its abuse on the Jan 6 prisoners.
The Ministry of Peace is involved with both the heavy erosion of the US military, and the promulgation and arming of the Ukraine war.
We’re in uncharted territory.
I have posted this before.
I was in Mongolia after the demise of the Soviet Union. Among the difficult times they had, I have never seen a people more proud of their past and excited about their future.
In their case they rediscovered Ghengats Kahn and Buddhism, their heritage, and they had freedom from the entrenched bureaucracy that had enslaved them.
What heritage will we rediscover?
Tough times brings out the best in people.
Look at all that sunshine.
Good cup of coffee.
My furry friend is with me.
Let’s see what’s bothering people today.
We’re in uncharted territory?
We’re Americans.
Give us uncharted territory.
That’s when we are at our best.
“Maybe we’re headed for the German economy of the early 1920s and the German politics of the 1930s. All at the same time.”
Comforting, ain’t it? *SPIT*
“Give us uncharted territory. That’s when we are at our best.”
I agree. Me & mine will be fine; it’s the millions of clueless slackers that I’m worried about. ;)
We were just discussing the new, ‘Brandon Ministry of Truth’ over breakfast this morning.
Chilling times we’re living through.
994 days to go! And, so many more worse things will happen between now and then. :(
Mostly due to heating fuels such as LP gas, natural gas and oil, all 3 are skyrocketing and consumers could be faced with costs exceeding twice what they had a few years back.
Dems don’t like hydrocarbons.
Voters not gonna like Dems.
That’s 50yrs apart. Interesting, I wonder if there was a “Panic” in the 1870’s?
“That’s 50yrs apart. Interesting, I wonder if there was a “Panic” in the 1870’s?”
Panic of 1873:
https://en.wikipedia.org/wiki/Panic_of_1873
Make America Last Again
Interesting... And about 50 years before that, there was a Panic of 1819.
“The Panic of 1819
In 1819 a financial panic swept across the country. The growth in trade that followed the War of 1812 came to an abrupt halt. Unemployment mounted, banks failed, mortgages were foreclosed, and agricultural prices fell by half. Investment in western lands collapsed.
The panic was frightening in its scope and impact. In New York State, property values fell from $315 million in 1818 to $256 million in 1820. In Richmond, property values fell by half. In Pennsylvania, land values plunged from $150 an acre in 1815 to $35 in 1819. In Philadelphia, 1,808 individuals were committed to debtors’ prison. In Boston, the figure was 3,500.”
https://www.digitalhistory.uh.edu/disp_textbook.cfm?smtID=2&psid=3531
Sorry, but the life style YOU HAD is unavailable for the next few years if ever!
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