In the 1980’s, Japan had a spectacular bubble. Everything was roaring, and the Nikkei went to just a hair shy of 40,000. It’s less than a fifth of that now, some 29 years later. When the bubble burst, real estate prices dropped 80%. The Japanese government did everything they could to arrest the bubble burst’s consequences. Interest rates went to zero, in the hope that people would borrow at no cost and buy something. Anything. The government kept the factories running, even though there were no buyers, thereby further destroying the economy. No one was buying anything. The government indulged in an incredible make work program of building public buildings, public roads, fast trains, and an airport built on land fill, extending out into the sea. The Japs had the world’s first really fast train, which runs on totally isolated trackage to avoid auto-truck crashes. Built with printing press yen, of course.
The Japs did everything. Increased the money supply, interest rates to zero, trillions of yen in public spending, and even a 20 trillion yen guarantee fund for failing businesses, which were on their way down to bankruptcy anyway. The funds “Disbursed under the program are often going to companies that are not credit worthy and that would otherwise go bankrupt.” The Japs developed their own PPT, or ’plunge protection team,’ which regularly bought up stocks to keep the Nikkei from going below a certain level. They had ten ’stimulus packages’ which alone cost over 100 trillion yen. They pumped yen into the banking system, and no one wanted to borrow. Nothing worked, and Japan is still in a depression, with its stock market at less than a fifth of what it was at its peak. Japan has an incredible national debt of 130% of GDP as a result of all the fixes. This debt is probably un-payable other than with printing press yen, backed by nothing.
Our own ’great depression,’ began in 1929 with the crash of the stock market. Herbert Hoover was President, and upon the crash, he did everything wrong, as did FDR at a later time. Hoover launched public works projects, raised taxes, extended loans to failing firms, and tried to get manufacturers and retailers to raise worker pay, even though consumer prices were going down. After FDR got into office, he said of Hoover, that he had presided over “The greatest spending administration in peacetime in all of history.” Hoover’s spending was to be dwarfed by FDR’s over his Presidency.
FDR became the world’s biggest spender, and when he ran out of gold-backed dollars, he tried to collect everyone’s gold to back more dollar spending. He tried to pack the Supreme Court so his nefarious programs and plans could go forth, but that was unsuccessful. The entire :Federal Triangle (between 15th St, 6th St, Constitution Ave and Pennsylvania Ave N.W.) collection of bureaucracies and fancy buildings was built and inaguerated under FDR. Endless cabinet posts were created, and public spending was unparalleled in modern history. Nothing before or since is equal to the Roosevelt-Hoover spending. FDR and Hoover built dams, post offices, roads, and cleared forests. The CCC Program hired tens of thousands of out of work men to work in the forests, many of which had been created out of seized land. This went on for almost a decade, and nothing worked. The ’great depression’ continued.
Roosevelt thought that if he could keep prices high, that would solve the problem, so he had farm prices frozen at high levels. Everyone was out of work, so no one could buy farm products. The Roosevelt Administration, rather than keep people eating, deliberately destroyed farm products. They poured milk down drains, and burned good food rather than allow prices to go down. Cattle and pigs were slaughtered and burned. FDR had the NLRB (National Labor Relations Board) established, which virtually forced workers to join unions and thereby radically increase prices of consumer goods, which no one could afford anyway. The first public housing was built under FDR, and welfare established. FDR raised taxes rather than cutting them, which further exacerbated the plight. Everything absolutely wrong was done, and the spending and absurdity will probably be duplicated by the Obama Presidency. Why doesn’t anyone realize that by repeating failed history, the results will be the same?
It’s interesting to note that there was no inflation during the great depression, but rather deflation. Prices went down because of little demand. It wasn’t untilF DR got us into WW II that prices went up. The gold backing of the dollar was cut down in that war, which permitted more dollars to be put into circulation to fight the war. After the war was over, those dollars came home to roost, and the inflation that followed was the cause. A Ford, which sold for under $700 before the war, now was twice that in 1946. The dollar was still partially backed by gold after the war, so the inflationary trend was kept in check… sort of. That check existed until Nixon removed the last smidgen of backing in 1971, and at that point inflation could be free ranged, and has been ever since. There are no restraints to dollar production now, and in this depression, I’ll guarantee you that there will be inflation, and lots of it. Hyper, as a matter of fact.
Which brings us down to the nagging question of whether to pay off your mortgage or keep it and pay it with ever cheapening dollars. Many who thought their jobs were secure, are finding that they aren’t or weren’t, and my heart goes out to them. If you have enough dollars to pay off your mortgage, but don’t, because the interest is tax-deductible, I think that may be a thing of the past under Obama. Maybe you should buy gold and pay it off with a couple of Gold Eagles in the future, or maybe you should pay it off now and be rid of debt. There are several points to consider. Is the home going to go down, down, down, due to over-supply? If so, maybe keep the mortgage and walk away from it, ruining your credit when the neighborhood goes? Pay it off and hope there won’t be foreclosures on your block, ruining everyone’s value? Nothing is secure under a depressed situation, and I for one, am glad that I don’t owe anyone a single farthing. It makes one sleep better at night.
Where to store your gold and silver? Where no one would ever think of looking, that’s where. Get a safe? Safe Deposit box at your bank? Bury it under a metal sewer or water pipe to escape a metal detector? Any of these I suppose, but don’t tell anyone what you have decided, except your wife or kids. If it a safe deposit box, be sure there are your kids and mate’s names on it. Will safe deposit boxes be seized? If doubt it, but I don’t have one. Do not buy GLD and like things, which are supposed to have tons of gold and silver stored overseas someplace. I doubt that there is gold there, and if there is, I’ll bet there’s damned little of it, and why in the world would you want your gold stored at some place thousands of miles away? I can see the possibility of laws prohibiting sending gold and silver overseas or receiving it from overseas.
Today, the Fed is pumping another TRILLION bucks into the failing economy, and even the morning talk shows and CNBC are talking about a “wheelbarrow of money to buy a loaf of bread.” On MSNBC, Erin Burnett showed a billion dollar bill from Zimbabwe, and hinted that it could happen here! At least spring is here and the swallows are coming back to Capistrano. Just protect yourself, that’s all, because harder times are coming.