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Thursday, January 7, 2016

The Year of Debt Deflation

With the markets opening this past year on the decline, I can only conclude that this is the beginnings of debt deflation.

At least I hope so.

The fact is, China was always in a huge real estate bubble and it would have been obvious to anyone who isn’t Peter Schiff once you realized that nobody was living in their infrastructure.  At least people lived in homes in the US’s housing bubble.

Housing in the US is still in a bubble.  What happened in 2008 was merely some idiotic government putting a piece of tape over the leaking hole then inflating it again.  What I mean is that the housing crisis was never allowed to completely resolve itself and instead the real damage was delayed.

Meanwhile the price of oil continues to drop.  For the average American, this is wonderful news.  It means gasoline prices drop and you’ll have more disposable cash on hand.

But because the US dollar is essentially an oil-backed currency (fiat currencies are abstract ideas, not reality), the dollar is deflating as well, but we won’t notice it for a time.

While the market may make an uptick in the future, it doesn’t take an expert to see what is happening.  The long-term is rapidly becoming the short-term and no amount of government intervention will stop it.

My advice is to get out of as much debt as you can and start saving money.  I don’t think we’re facing a civilizational collapse (yet) but there will be some pressure in the near future as well as a rise in unemployment.  So make sure you are prepared to deal with those scenarios.

But really, you should be doing those things anyway.