I consider it very beneficial for the subscribers/readers of EconomicTheology.com to recommend an article published very recently by GoldSwitzerland.com regarding the economy and outlook for investments. It was written by Egon von Greyerz in English, French, and German, but for all languages it is entitled in French, “Apres Nous Le Deluge” (translated, “After Us the Flood”). Before I provide you the link, however, let me make a few notes here to help some of my readers.
First, the author identifies the coming economic tsunami correctly (in my opinion) as being a hyperinflationary depression. This fact suggests that a small explanation would prove helpful to some of my readers.
When one speaks of “hyperinflation,” most people immediately conceptualize the result (i.e. prices exploding in such a way as to require “millions” of a unity of currency to by a loaf of bread). Few understand this economic and monetary phenomenon enough to properly identify the cause: Namely, over “printing” of a nation’s currency, which devalues the individual units so much that it takes “millions” or even “trillions” of them to buy a loaf of bread. In short, hyperinflation is a monetary policy phenomenon (i.e. caused by governments and central banks), and not a market or price phenomenon.
For more explanation of that point, consider reading the following two posts of mine found upon TheWisdomOfGold.com:
The next word to discuss is the term “depression.” Dictionary.com gives a reasonable explanation of this concept as:
A period during which business, employment, and stock-market values decline severely or remain at a very low level of activity.
In short, a “depression” is when the economic activity of a nation declines dramatically. Production (e.g. farming and manufacturing) is down. Consumption (i.e. product/good sales) are down. Investment is down. These facts all cause employment to be down as well, as companies have to reduce their overhead to account for the reduction in revenues. In short, activity has declined within the marketplaces, and real prices tend to also drop within such an environment as more and more people are unemployed and confidence in the economic future declines among the population.
Now I said, “real prices” above because during a hyperinflationary depression, “prices” as measured by the currency can be exploding upwards at an alarming rate while their real value declines dramatically.
When economic activity is slowing (i.e. a depression) then a “buyers’ market” emerges as there are fewer and fewer business transactions and sales being executed in the market place. When this occurs, sellers have to reduce prices in order to induce buyers to come to the table for a transaction. Real values of real estate, cars, and other durable goods, along with investments such as equities (e.g. stocks) decline as fewer and fewer people are willing to buy.
Values decline when economic activity declines. This is a hard and fast rule.
However, into this “buyer vacuum” too often steps the government (through their central bank) with efforts to “stimulate” the economic activity by flooding the market with their currency. In Zimbabwe recently, and Weimar Germany back in the early 1920s, this was done by “printing” money (literally) and spending it into the economy through government purchases and wages, bank loans, and other similar means.
However, the “benefit” of this policy is short lived as the markets respond to this new influx of currency and raise prices accordingly. So the “cash price” eventually goes up because the flood of new currency reduces the buying power of each individual unit. This sometimes has a “stimulating” effect on the economy in the short term, much like a sugar rush might make a person feel “energetic” for a short while. But after the “rush” comes the sugar “crash” that makes the person feel worse than they did before the artificial stimulation.
The same is the case with economic “stimulus” as well. The net result of the currency injections when economic activity is slowing because of real systemic problems with the economy, is to further exacerbate the very core problems that are causing the depression (or in the initial stages, a recession). As this process accelerates, the government does MORE of the same terrible monetary policies and spending as the central banks “create” more money. This creates more economic decline, which causes the government to do more…and so on. A spiraling vortex of economic insanity on the parts of the government and central banks destroy both the economy and the currency.
Of course, government twisting of economic data (such as inflation statistics) might pacify the public and markets for a while, but the savvy market participants are not fooled for long. Such “official” deception eventually looses its effect as the public realizes that the government is corrupt and lying to them. (And all governments today have these last two characteristics.)
So here we have the phenomena in question that my article here is written to identify: A hyperinflationary depression is one in which the real economic activity and employment is declining rapidly as the markets collapse, while central bank “money printing” causes prices to explode as the currency collapses as well.
The first place that such a phenomenon reveals itself is within food, energy, and commodity prices…and that has already been occurring for about a few years now globally. Such price inflation is only now beginning to show its ugly head within the United States, however—and this will accelerate throughout 2011 at an alarming rate. However, rapid food/energy inflation has already been occurring within many other nations of the world, and the riots and revolutions now being broadcast in the news is the unseemly social upheaval that eventually results from such economic events.
(Thus, these are certainly issues that demand that Christians address, and to apply godly wisdom toward, as the suffering of humanity is certainly within the scope of any sound New Testament theology.)
Of course, today the “money printing” is not even necessary. Most Western central banks “create” money with a few key strokes on their computers within our modern high tech societies. Thus, the rate at which this explosion in prices can occur during this next global hyperinflationary depression can and WILL be far faster than anything that has occurred within known monetary history before.
In short, an economic “tsunami” of biblical proportions is about to occur, and the world will not be the same ever again thereafter.
With the above introduction in mind, let me now provide you the link to the article I mentioned at the start of this post. Therein, you will see a very clear and detailed explanation of the current global crises that are unfolding around the world—even within the United States of America—and suggestions for how to reposition your investments in order to at least partially prepare for the inevitable. The charts and data are also excellent, and I agree at least 99% with the author’s analysis thereof:
Apres Nous Le Deluge, by Egon von Greyerz
I mentioned “partially prepare” because in the coming crisis, the most valuable thing will not be money or investments…or even food…but righteousness:
Riches do not profit in the day of wrath, But righteousness delivers from death.
(Proverbs 11:4, NKJV)
In truth: While it is wise to reposition your wealth and investments, and to prepare for the coming food shortages and breakdown of societal infrastructure, the key thing is that you need to know the One true and living God. Without Him in your life, you will be “without hope and without God in the world” (see Ephesians chapter 2 in the Bible). Thus, within the midst of violent social upheaval and dangerous times, you will be without even a prayer.
So here is the link to the article I have written to help you ensure that you have righteousness before God, our Holy Creator:
The Supreme Value of Righteousness, by Rich Vermillion
If you have BOTH righteousness with God AND a sound investment and preparatory plan, you will do well. Even in the worst case scenario: You will walk on streets of gold in Heaven and enjoy the goodness of God for all of eternity. That is a whole lot better than ANY earthly possession, indeed.
Always in Jesus,