Depression, Stagflation, Stag-Depress-Flation

The United States suffered through a deflationary depression in the 1930s. Stock prices crashed, currency in circulation declined, commodity and real estate prices fell hard and human misery prevailed.

President Roosevelt revalued gold from $20.67 to $35.00 per ounce in 1933 – a substantial devaluation of the dollar. Make-work and government spending programs were implemented. War followed the depression.

Then the United States suffered through the “stagflation” of the 1970s. The economy stagnated and inflation rose to previously unheard of levels. The Vietnam war, inflation and social protests dominated the news, gold shot upward from $42.00 to over $800 per ounce and the dollar bought much less. Government spent massively on the Vietnam War and social programs.

Those two eras had a number of commonalities – war, more government programs, excessive government spending, social unrest, and escalating gold prices.

Both were periods of weak or negative economic growth. The 1930s were deflationary and the 1970s were inflationary.

Stag-Depress-Flation of 2017 – 2025 might be next:

How and why? Everything is wonderful – we have new DJIA highs and a new President. Yes, but:

Official National Debt is nearly $20 Trillion, an outrageous sum. Corporate and personal debt, including mortgages, credit card debt, auto loans and student loans are huge and difficult or impossible to pay.

95 million Americans are without jobs but are not included in the calculations so we are told the official unemployment rate is low.

Most people live paycheck to paycheck and have little savings and minimal retirement funds.

Interest rates peaked in the early 1980s and declined until last August. A 35 year trend that has reversed suggests interest rates will increase for years or perhaps decades. Those increasing interest rates portend bankruptcies, declining corporate profits, higher unemployment, derivatives crash, and increasingly squeezed Americans overloaded by excessive debt, even if they retain jobs.

Higher interest rates will weaken the real estate market – already happening – and most certainly will hurt the refi market – already happening. The auto market will suffer – already happening.