The Phaserl


The Deflation Monster Has Arrived – And It Sure Looks Angry

by Chris Martenson, Peak Prosperity:

As we’ve been warning for quite a while (too long for my taste): the world’s grand experiment with debt has come to an end. And it’s now unraveling.

Just in the two weeks since the start of 2016, the US equity markets are down almost 10%. Their worst start to the year in history. Many other markets across the world are suffering worse.

If you watched stock prices today, you likely had flashbacks to the financial crisis of 2008. At one point the Dow was down over 500 points, the S&P cracked below key support at 1,900, and the price of oil dropped below $30/barrel. Scared investors are wondering:  What the heck is happening? Many are also fearfully asking: Are we re-entering another crisis?

Sadly, we think so. While there may be a market rescue that provide some relief in the near term, looking at the next few years, we will experience this as a time of unprecedented financial market turmoil, political upheaval and social unrest. The losses will be staggering. Markets are going to crash, wealth will be transferred from the unwary to the well-connected, and life for most people will get harder as measured against the recent past.

It’s nothing personal; it’s just math. This is simply the way things go when a prolonged series of very bad decisions have been made. Not by you or me, mind you. Most of the bad decisions that will haunt our future were made by the Federal Reserve in its ridiculous attempts to sustain the unsustainable.

The Cost Of Bad Decisions

In spiritual terms, it is said that everything happens for a reason. When it comes to the Fed, however, I’m afraid that a less inspiring saying applies:

Yes, it’s easy to pick on the Fed now that it’s obvious that they’ve failed to bring prosperity to anyone but their inside coterie of rich friends and big client banks. But I’ve been pointing out the Fed’s grotesque failures for a very long time. Again, too long for my tastes.

I rather pointlessly wish that the central banks of the world had been reined in by the public before the crash of 2008. However the seeds of their folly were sown long before then:


Note the pattern in the above monthly chart of the S&P 500. A relatively minor market slump in 1994 was treated by the then Greenspan Fed with an astonishing burst of new money creation — via its ‘sweeps” program response, which effectively eliminated reserve requirements for banks .That misguided policy created the first so-called Tech Bubble, which burst in 2000.

The next move by the Fed was to drop rates to 1%, which gave us the Housing Bubble. That was a much worse and more destructive event than the bubble that preceded it. And it burst in 2008.

Then the Fed (under Bernanke this time) dropped rates to 0%. The rest of the world’s central banks followed in lockstep (some going even further, into negative territory, as in Europe’s case). This has led to a gigantic, interconnected set of bubbles across equities, bonds and real estate — virtually everywhere across the globe.

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1 comment to The Deflation Monster Has Arrived – And It Sure Looks Angry

  • Ed_B

    “What the heck is happening?”

    What’s happening is straight from the banksters play-book. They have done this repeatedly for many decades now. In fact, this has been going on for so long that Thomas Jefferson himself commented on it over 200 years ago:

    “If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered…I believe that banking institutions are more dangerous to our liberties than standing armies…”

    Well, guess what. This IS the plan and it has been the plan for a very long time. The Great Depression is a 1st class example of this, where inflation was created and fed via “The Roaring Twenties”, followed by the deflationary depression of the 1930s. This economic whip-saw is done to separate people from their wealth when they cannot service their loans or they have to sell at low prices to get the cash they desperately need because of economic conditions. Wash, rinse, and repeat… which they do moderately about every 40 years and then aggressively about every 80 years. This reinforces the concept they have created called the business cycle and scoops up hundreds of billions worth of OUR wealth for their pockets. It is shameful, disgusting, and repetitive. We either need to either stop this financial merry-go-round or get the hell off of it and sooner rather than later.

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