Of boom, bust but maybe not the Black Death

By J Saft
January 9, 2009

James Saft Great Debate – James Saft is a Reuters columnist. The opinions expressed are his own –

As the crisis has deepened we’ve had to search farther back in history for precedents, and with deflation at hand much of the debate now centers on how similar the next while will be to the Great Depression.

But what if, rather than the 1930s, we ought to be thinking about the revolutionary crisis of the 18th century, or even further back to the 14th century lending and spending spree that ended with the Black Death?

A reading of The Great Wave: Price Revolutions and the Rhythm of History, by Brandeis University historian David Hackett Fischer will ring a lot of bells.

Fischer’s book, published in 1996, looks at price data back to the time of Babylonian king Hammurabi, and actual series of prices back to Europe in the 13th century.

As the title implies, Fischer finds in the data a succession of waves, often lasting more than 100 years, of first inflation punctuated by violent crises and then very long periods in which prices are basically stable. The most recent “Great Wave” of inflation began in 1896 and may or may not have broken on the shore of the current debacle.

“It looks as if the long inflation has come to an end but we can’t be sure,” Fischer said in an interview.
He makes no claims for the predictive value of his work, unlike those who study cycles, and cautions that the wild swings that characterize the end of waves make it impossible to judge until well after the fact.

The period that perhaps ended in the summer of 2007 fits in some broad and telling ways with his characterization of the latter stages of an inflationary wave: wealth inequality increased; returns to labor fell but returns to capital increased; debt was built up, both public and private; and there were severe commodity price shocks.

There are also some real similarities in how a crisis usually plays out, according to Fischer, and our own current state: a rapid fall in prices, rents and interest followed by a very sharp deflation.
So, will the near future feature scenes of 14th century-style devastation?

Almost certainly not. While each of the huge busts following long periods of inflation have featured violence, disorder, financial markets upheaval and the toppling of old orthodoxies, each crisis has been successively less severe than the last.

That’s likely because people have become better at managing the effects of financial disorder, and even though hopes of a great moderation in the global economy now look silly and the old certainties about markets and economics are under attack, there is good reason to hope that this time will be less severe.

A SOVEREIGN CRISIS?

Another possibility, not as grim as the Black Death although hardly appealing, is that we are about to enter into a last climax of inflation, courtesy of desperate deficit spending.

The latter stages of inflationary periods in the past featured effective bankruptcies on the back of fiscal stress by France in the 18th century and Spain in the 16th century, the economic and military giants of their times.

“It is conceivable that with the way the printing presses are going to have to be running to pay for all of the stimulus that is going to be happening all over the world we could well see another huge wave of inflation,” Fischer said. “And now there is a real potential for the greatest power in our own time heading towards some sort of a crisis of sovereign credit.”

Again, history doesn’t repeat, it rhymes, and there are good reasons to think this won’t happen.
At any rate, I think it’s fair to say that our current framework and discussion are actually based on an analysis of a relatively short period of history, one which because we have good data about it rewards debate and analysis but which can lead to an overly narrow vision of what is possible. Talking about depression and deflation would get you jeered out of court two years ago, and there was an unnaturally broad consensus about the benefits of financialisation.

And of course there is also the possibility that we will pass into a true period of equilibrium, without notable inflation and with narrowing differentials between wealth and poverty and higher returns to labor.

In the past, such periods have included the Renaissance, the Enlightenment and the prosperity of the Victorian period.

Regardless of where we are in the wave, it seems that the forces in alignment — deflation, regulation, an expanded role for government in the economy and a structurally smaller share of GDP for finance — will not favour returns to capital. The stock market may be a bit early in rallying, even if we are still surfing the wave.

– At the time of publication James Saft did not own any direct investments in securities mentioned in this article. He may be an owner indirectly as an investor in a fund. For previous columns by James Saft, click here. –

52 comments

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See Robert Prechters “Conquer The Crash”.

Posted by kelly p | Report as abusive

We are witnessing the collapse of that swindle known as “Free Trade”. The USG scam known as “Free Trade” has done nothing but squander our economic sovereignty, ruin our manufacturing and allow US corporations to buy coolie labor in Asia. The balance of payments (BOP) for the past ten years have been negative every year to a total of almost $5 trillion! The BOP has come due. If Prez Obama wants to “fix the economy” all he has to do is end “Free Trade”. Moreover, any of these so-called economic experts who continue to advocate for “Free Trade” are delusional fools. The BOP proves that sad fact.

Posted by RFL | Report as abusive

The United States, financially, has been out of control for years. We are starting to see the unstable nature of this now. I don’t understand how you can solve the problem of easy money with more easy money. (printing press money) I agree with another poster that free trade is also part of the big picture. As my father used to say, “there is nothing for free in this world”.

Posted by stan trexler | Report as abusive

Place input tariffs on goods from countries that pollute willy-nilly and treat their workers like beasts of burden. That would make for a “level playing field.” I’m willing to pay more for all this junk I don’t really need.

Posted by Walter Amos | Report as abusive

As, e.g., the rule for semiconductor generational advances has reduced greatly in time over the years of its evolution, so perhaps has the time for great societies to exist. Perhaps we are nearing our end in less than 250 years, and that time span may well relate to the Egyptians(many more years), the Greeks( fewer years than the Egyptians), and the Romans(even fewer years) which ended long ago after much more time in existence than ours. Perhaps this advanced pace of societal failure is the price we pay for our progress?

With progress, everything in life has speeded up drastically; perhaps even the great American experiment has nearly burned itself out as a result?

Posted by richard | Report as abusive

About all I have to say is AMEN, RFL! “Free trade,” the great con game to shunt riches to the upper classes around the world. All on the backs of labor that produces real assets instead of worthless layers of gambling paper with no intrinsic value.

Posted by Ray | Report as abusive

I try to read as widely as I can on the current crisis. The number of different interpretations by informed commentators are so numerous as to be totally confusing not to mention contradictory. This is probably a function of vested interests

Having said this, there seems to be increasing consensus that the USA / Fed are making too many mistakes in their responses to the crisis. This is cause for outright alarm because just as the crisis spread from the USA so will any mistakes they make.

What to do? Create a think tank working group manned by the top commentator/s from each of G8 / BRIC countries (eg Roubini from the USA, but no bankers please). Lock them in room until they reach consensus on cause, effect and what needs to be done. Implement the resultant plan.

If this crisis comes down to every man (State) for himself then the world will need a very big fan to deal with the results

Posted by anton kleinschmidt | Report as abusive

Yes, but, on the other hand. Isn’t it true that
a) such fancy stuff as CDSs, CDOs did not exist in previous crises;
b)Nor was any of the previous crises global – not even the 1929 one;
c)Nor have national economies ever been interlinked to such a degree as they are today;
d)Nor was there a scarcity of resources in previous crises, high yields were always a possibility. Not so today; and
e)Nor was the environment at its breaking point, as it very possibly may be today. And if it is, the environmental cost of producing the growth necessary to come out of this hole might take the environment over the cliff.

So, do we really have a previous crisis that could even remotely be likened to this one? I think not.

Posted by Robynne | Report as abusive

The resolution to this crisis is astonishing in its simplicity – end “Free Trade”. Until “Free Trade” is ended and manufacturing returned to the USA the crisis will continue. Remember; Obama is a “Free Trader”.

Manufacturing is the ONLY creator of real wealth.

Posted by RFL | Report as abusive

Demographics will play a big role. See Harry Dent’s “The Great Depression Ahead.”

Posted by Matt Holbert | Report as abusive

To be sure, 78 millions baby boomers are 60 or older.

Posted by RFL | Report as abusive

Manufacturing is a “value added” activity. Developing natural resources,i.e. mining, farming are the only means to create wealth.

Posted by Joe Wojcik | Report as abusive

Free trade provides cheap goods, and enables international division of labour = efficiency. China has bought U.S. bonds etc with its gains from trade, so its nice (but predictable) for Americans to blame the consequences of their misuse of that capital on foreigners. A strong move away from free trade by the U.S. will (1)push prices up in real terms – you will have to work longer to get the same amount of stuff; (2) reduce world trade, furthering the global economic contraction, which will feed right back to the U.S.; (3)push foreigners to dump their U.S. holdings, potentially leading to default by the U.S. government.

Posted by NZ economist | Report as abusive

For all you anti-free trade fans, protectionism will only make things worse. It happened in the Great Depression and caused a lot of pain.

What protectionism gets you
http://tinyurl.com/7gqccn

Posted by Chad | Report as abusive

“Free trade provides cheap goods, and enables international division of labour = efficiency.”

At what cost and to whom?

Your point/s has been used as justification for “Free Trade” for decades and it has brought financial ruin to the USA. Our congress can’t even discuss trade legislation that affects the Red Chinese without having them threaten to dump US debt on the market. The USA has become a slave to Red China because of incompetence on our government’s part excused up by the mantra of “Free Trade”.

To be sure the Chi-Comms are financing the USG. Perhaps the time has come to let the USG go bankrupt so we can force reformation: “A better and stronger company (USG) will emerge on the other side of bankruptcy”.

Posted by RFL | Report as abusive

There is one mega trend of history that is as certain as can be – we are entering the Fourth Turning. See: http://www.fourthturning.com

This bubble crisis will continue because we (leaders, pundits and the general population), are still deep into bubble psychology and expectations. Money and credits were created like mad to fill infinite expectations for a long time. Far beyond the real value generated. So now things get ‘de-leveraged’ back to real value. But that is painful and spoiled population can’t handle that. So the same bubble psychology now demands stimulation to relieve the pain, by yes, creating yet more money and credits. This will trigger another round of blow ups in a few years. That blow up can be economic, or military conflict. Until the bubble psychology is no more.

Is my pessimism a fiction? No, just read The Fourth Turning. (find it in amazon.com)

Posted by TomK | Report as abusive

I’m not blaming corrosive USG trade policy on foreigners (Chinese or otherwise). I lay the blame strictly at the doodstep of the United States Government. “Free Trade” has ruined this country and it’s time it was stopped.

We pay outrageous retail prices for imported red-chinese products in the USA – products manufactured by coolies, paid coolie wages exploited by their government and US corporations.

Of course,I’m not a NZ Economist dreaming up theories in the white towers of academia or government. I’m just a well educated US citizen with wide ranging business experience who has seen first hand what “Free Trade” has wrought on America.

Posted by RFL | Report as abusive

Those who speak against \”Free Trade\” as job sell off unfortunately see only one effect. Jobs would have gone to Asia anyway – as they relate to North America jobs have been repositioned rather than lost. It is necessary to look at NA as a border less state when economics are concerned. The faster we get Mexico and the South American countries in th fold the better for the Americas – yes including the USA.
The auto industry is a prime example of a dinosaur US/ Canada business that saw some of the writing on the wall. The big 3 management invested in Asian auto companies. But the NA workers ignored the obvious and kept pumping the well. It is now dry.
Bailouts? Waste of money and delaying the inevitable bankruptcies. Free trade may well be the saviour of the NA economy if expanded quickly enough.

We in USA need not worry as long as Dollar remains the world currency, for oil.
Iraq tried to take that away and was punished. Yes we did accomplish the mission when our president said so. Iran has started accepting yen and euro for oil, they need to be punished and will be punished soon. For now, we just need to wait for an opportunity. I guess they will fall into the trap of current gaza war.

Posted by das | Report as abusive

Not only does ‘free trade’ need to be ended, but also it and its advocacy must needs be made a felony punishable by life imprisonment or death with no appeal and no parole. Do like the New Zealanders do with their new legal system…they just passed changes to their legal system to require guilt by accusation. That meaans all it takes is your neighbor to accuse you of witchcraft and you will be straightaway taken to a gallows and burnt at the stake. Or whatever. Seriously free traders are economic saboteurs. So are NIMBY pathoskeptics about energy development, especially nuclear power; except energy development opponents are probably Muslim terrorists or their dupe, enemy agents, or just plain traitors. Given their history of evil over the last half century, they will not change and will have to be executed. Maybe these policies will not come to pass now as not enough citizens are suffering and dying yet. Picture this not as 1932! We are Americans. Think larger countries where this happened! Think 1789 France or 1917 Russia or 1930 Germany. When unemployment is admitted to be over 16 percent by liars that know that is is over thirty percent; when starving masses repeatedly riot for food; when television censorship is enforced by the upcoming ‘digital conversion’ (who do they think they are kidding?); when thousands and thousands die of exposure, hunger, cold, and disease…what will we do then? Our government is completely penetrated by various traitors, nut jobs, fellow travelers, Chinese collaborators and other Quisling types not to mention home grown crooks on foreign payrolls, and as such is unable to reform itself. It will take a few new elections and a revolutionary political party. Alons Enfant de la Patria, le Jour del Gloire est Arrive…..Aux Armes, les Citoyens!

Posted by John Smith | Report as abusive

David Hackett Fischer sounds like a student of the French Economic Historian Fernand Braudel. I think Braudel founded the discipline of historical economic analysis. He died at least ten years ago but his popular series – “The History of Capitalism” is still in print.

Braudel mentions that there are many frequencies of economic “wave”. He noted one called a “Kondratiev” after the Russian economist – a Marxist by the way – that means a cycle of about one hundred years. It’s been a long time since I read Braudel’s History of Capitalism but the “Kondradiev” stays in my mind because Braudel used the term to refer to a late Middleages period of economic decline that lasted about 100 years. There was no reason for the decline. The Spanish bankruptcies (three in a row) Braudel attributed to the massive amounts of gold being imported from the new world and the enormous cost to the treasury of maintaining the largest empire on the globe. There was just too much of gold in circulation. Can’t be sure about the dates because it has been a long time since I read the series.

An irony, Braudel also mentioned, about the plagues in Europe was that they were generally followed by a wave of prosperity. Perhaps old societies, rather like our own now, tend to stratify with wealth being locked up in a few powerful hands. The plagues seemed to loosen their grip on resources and the money and resources start to move again. The European economies had miserably inefficient ways of tax collection. It wasn’t just the French Ancien Regime that used Tax Farmers and evidently the wealthy then knew how to pass the burden to the lower classes such that it guaranteed that the taxes fell heaviest on those least capable of paying them. That has a familiar sound to it doesn’t it? It is a very effective way for the wealthy to kill off the up and comers and insure their own inherited wealth and social status. Those old aristocrats loved their restricted gene pools.

But Braudel noted something else about societies that undergo dramatic shifts of power. At one time in the early Renaissance (again I can’t remember the exact period) the Venetian state lost most of it’s aristocratic families due to war and/or plague (can’t quite recall the reason either) which allowed the second tier below them – the affluent merchant class to fill their places very quickly. In spite of that mass replacement, the new “grandees” tended to act and vote identically like the former aristocracy. Braudel also noted that every society – no matter the economic or political model – tends to maintain an elite class of roughly five percent of the population.

I think the people screaming for an end to free trade are talking a little too late. If we don’t trade openly we will probably bring back the days of warfare to acquire and preserve resources and colonies. But isn’t that Iraq? No economy seems ever in history to have been able to go it alone and feed only their own needs and consumption. For one thing they never control all the resources they need to make a high standard of living. Geography has a say in the development of an economy. There is no rapidly growing economy unless there is substantial foreign trade. The US is somewhat stagnant in population growth. The developing world is growing people very rapidly. High trade barriers here will be met with high barriers over there. And actually there are many developing countries that would like the US and the rest of the developed countries to back off. How many times has the developed world complained about the US agricultural industry tending to destroy their own means of production and its attempts to control the seed stock as well through patent protection for genetically modified seeds?

If there is no free trade than what would be the point of trying to recreate a manufacturing base in this country? Not even 1.3 billion Chinese can consume everything they produce.

In fields such as medicine and astronomy, reality is now understood to be more complex than earlier reductionism and “essence”. With scientific methods of empiricism, practical knowlege advances and benefits follow.
The politics of economonics – who starves, who gloats – seems to ensure that understanding and debate is at the level of butchers practicing medicine, or astronomers reading the entrails of goats.

Posted by Survivor? | Report as abusive

The answer is to go back – let vendors make a 35% profit like in the old days — BEFORE lunatic Ronnie Raygun and his despicable global villainess, Iron Lady Margaret Thatcher put us in this global mess.

Before Raygun, the business world’s principal was ‘you mark it up, I mark it up, we all make a buck…” NOW after Raygun killed local economies in a game of King of the Hill, the mantra is, “you skim it down to the bone, I prices down to bone and hope we sell a lot of ‘em.”

It ain’t working and never did.

Posted by pre1980's Ronnie Raygun | Report as abusive

The problem isn’t necessarily a ‘free trade’ issue, but is a ‘fair trade’ issue. The Asians support their industries with non-tariff barriers; whereas, the U.S. markets are mostly open to foreign goods. For example, the South Korean auto market is over 95% domestic (Korean), and it isn’t because their industry is that competitive; at the same time, Korean automakers shipped hundreds of thousands of cars into the U.S. The U.S. serves as the consumer of the world’s goods. When the U.S. economy goes down, the rest of the world goes down. If the U.S. can’t turn it around quickly, or if the Chinese doesn’t open up their markets, then this downturn will last a long time.

Free trade is not the problem. Ross Perot talked about ‘the great sucking sound’ of all the jobs going to Mexico. About three years later with Clinton at the helm, the U.S. hit what was considered negative unemployment (a rate so low that even Burger King was running literacy programs to find anyone to work for them). Any organization takes its lead from the top. The U.S. has endured eight years of incompetent thieves running the show, and it is a miracle that the country still exists. When Clinton left, the U.S. was on track to having zero debt, a situation that would have made it relatively easy to fix any weaknesses in the system (social security, medicare, etc).

Posted by James Perly | Report as abusive

The Chinese have exploited the US by letting themselves be exploited. Now they will turn their factories to producing things for the Chinese. The dollor will be worth less than the Zimbabwean dollar in a year.

Posted by kermit_the_frog | Report as abusive

Yep, free trade agreements have got to go. The US has been sponging off the labour of others for too long.

Place input tariffs on goods from countries that pollute willy-nilly and treat their workers like beasts of burden. That would make for a “level playing field.” I’m willing to pay more for all this junk I don’t really need.
- Posted by Walter Amos

That’s a great idea, but we can’t stop there — countries should also be encouraged to add tariffs to counteract subsidies other countries give to products. Because let’s face it, not even Obama has the political strength to end subsidies.

Your point/s has been used as justification for “Free Trade” for decades and it has brought financial ruin to the USA.
- Posted by RFL

Actually, what brought financial ruin the USA was that when Americans were offered cheaper goods they didn’t say “great, I’ll take that $200 I saved on a TV and invest it wisely, or help my brother start a business, or do something else that’s useful with it”, they said “great, now I can have 2 cheap TVs!” So there was no benefit. Economists argued there was a benefit because someone with 2 TVs is better off than someone with 1 TV, but obviously that’s codswallop.

Posted by JEQP | Report as abusive

For those of you truly unfamiliar with the American psyche (or what passes for it after 30 years of Conservative brainwashing), I want to point out that most of my fellow citizens are sleep-walking into, through and around this crisis. Ours is not the European or Chinese reaction. Here, if you lose your job, your house, your retirement, your stock portfolio, it is still believed to be a personal failing. There’ll be no riots, no simmering outrage, no electoral revolts (though there was that Obama thing — I’m still reeling). Historical cycles or no, we Americans have a way of muddling through. That’s not to say that’s a virtue, personally I think it is the opposite. The problem is one of history. We’ve always been able to run from our failures here in the USA. Screw up in New Jersey? Move to California. Go bankrupt? Wait seven years and start over. Contrary to the prevailing mythology, it was the Indians who were a settled people, and the white newcomers who moved around like gypsies. We still do. We never admit a mistake. And even if the world tumbles into a depression because of our foolishness, we’ll never accept the blame. Will lessons be learned from this recent debacle? I doubt it. We’ll keep juking and feinting until we find another bubble to blow up. So, watch out world. In a few years when you hear Americans say they’ve got a great new investment vehicle for you, Run!

Posted by Bob Foster | Report as abusive

As we count the suicides caused by Bernie Madoff, perhaps we should also start a list of those depressed beyond rescue by reading too much James Saft.

Posted by Andrew Powell | Report as abusive

[...] know what’s ahead. The media prophets and economic seers are telling me it’s probably not gonna get any better- even with the almighty Obama taking office in two short weeks. So what’s a guy to do? The [...]

Sigh, It’s all Shenanigans I say. It seems that we as Americans have a problem with not wanting to hear the bad information. And even if we do, most of us are too ignorant to look into it or even consider it a problem. We as a people have too much of a comfortable separation from those who are shit-out-of-luck because of our over-lending and creation of money out of thin air causing massive inflation. Looks to get worse thanks to the stimulus package…it has to be repaid somehow. Unless of course you are one of the 2.6 million who are now jobless…but it’s only a figure, a statistic. It seems that is what our reality of life boils down to, statistics, where if 2.6 million of 260 million people are jobless, that’s only 1% and is negligible (U.S is somewhere around 300 million I think…). whatever I guess…maybe we can wish the debt to other countries and the Federal Reserve away if we try hard enough?

Posted by Brenden | Report as abusive

I believe that banking institutions are more dangerous to our liberties than standing armies.
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 [the banks] will
deprive the people of all property until their children wake-up homeless on the continent their fathers
conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.

Thomas Jefferson, Letter to the Secretary of the Treasury Albert Gallatin (1802), 3rd president of US
(1743 – 1826)

Posted by Survivor? | Report as abusive

Fischer seems to have ‘borrowed’ much material from Elliott. While I haven’t read Fischer’s work, I wonder if Elliott was appropriately credited?

“Again, history doesn’t repeat, it rhymes”: Mr. Saft, if you’re going to quote or paraphrase Mark Twain, perhaps you should credit him, as well.

Posted by kielanders | Report as abusive

Sorry sir:
I do not know what you are trying to say? Is it a psychological problem with the human race or is it just plane economics? I buy, you sell? Economics is rather simple, I buy and you sell or vice versa? I work, adjust my debt to asset ratio and rely on the “State”, to take care of my social needs, correct? You give me examples of simple social anthropology but without the correct analysis.
Human emotions have more to do with economics,then the theory of economics, hence human psychology determines economics? Now I sound like you,confused? However, to bring in ancient economic patterns is absurd! But keep trying, because I will not buy a new car today, eventhough, I can afford one simply because I will make my present car last another two years, simple?

Most of the media commentary on the economic crisis assumes that we are experiencing some sort of cyclical phenomenon. But a more reasonable view is that we are experiencing a unique event, brought on by America’s choice to dismantle our manufacturing base, coupled with the reality of finite and dwindling fossil fuel supplies. Stimulus packages and tax cuts will not fix those things.

Posted by Mark Rowan | Report as abusive

With a CFD debt almost 80% to the GPD of the western economies and the poorest countries all together. There is no lender of last resort left. And with the Pareto distribution of wealth stating that 10% of the world holds 90% of all riches the top10 richest people are by definition the same ones who are holding the debts. Since their credit has run out: they fail.

Posted by Georges terryn | Report as abusive

I will trade my briefcase for hardhat and pair of workgloves. Also butter churn for axe. Call BR-549.

Posted by kelly p | Report as abusive

International trade on a level and fair basis is one thing, however the giveaways perpetrated by the USG is another. “Free Trade” as practiced by the USG has done nothing but depress US wages and realign management/labor relationships in this country. One hundred years ago we had the robber barons; today we have “Free Trade”. There is no difference.

Posted by RFL | Report as abusive

To cite the Victorian era as one of great prosperity is
certainly valid in so much that a number of people did
prosper . But the price for that prosperity was very
high. Child labor, slavery in the Americas, intolerable
working conditions; excessive use of gin and opiates
and a host of diseases, such as black lung, associated
with those intolerable working conditions. Moreoever,most
of the world’s population lived in Asia, and conditions
for most people in that part of the world during the
glorious rule of Great Britain, defy description. The
wealthy of England did not hesitate to take advantage of
those conditions either. Economic history is very illusive and more power to those who can nail it down.

Posted by Carole Shaw | Report as abusive

Extremely interesting comments.Have any of you heard of a country called Sri Lanka. The economies of all developed countries have been effected by the credit tsunami, and the eventual after effects.Sri Lanka has been an exception, it has a war, and nearly 20% are on welfare,the highest tax rates,indirect and direct, almost 55%, the most corrupt politicians, who rob 80% of the taxes, along with the tax officials pocketing the tax.Sri Lanka has ben able to match the mighty USA dollar, when every currency aroung the world have lost nearly 25 – 35% against the USA $. Can I recomend our Central Bank Governor to help out Paulson

Posted by Ceylon Ta | Report as abusive

Perhaps the worth of a columnist is to spark debate.
I am impressed with some of the responses herein.

I have been reading Herman E Daly, Frederick Soddy,
Nicholas Georgescu-Roegen, Heinrich Gossen, Jeffrey
D. Sachs, and James Gustave Speth.

Capitalism can never be made sustainable.
Obama knows this and he has opened a dialogue
with the people which should have been settled
with the American Revolution versus King George.
Madison and Jefferson went head to head.
The duel will now be settled globally.
T Jeff Clinton also proved what is possible
compared to G W Bush, obviously.

What will we each offer to settle this now?
Willing or not, we will all have to address entropy.

Posted by Katje Sana Erickson | Report as abusive

“I believe that banking institutions are more dangerous to our liberties than standing armies.
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 [the banks] will
deprive the people of all property until their children wake-up homeless on the continent their fathers
conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.

Thomas Jefferson, Letter to the Secretary of the Treasury Albert Gallatin (1802), 3rd president of US
(1743 – 1826)”

I have always been a great admirer of Thomas Jefferson. Where is he when we so desperately need him. It is clear how W financed the War In Iraq.

Posted by RFL | Report as abusive

History still awaits a successful Non-Capitalist system having witnessed the dismail failures of tribalism and socialism.

As Churchill stated – It’s a terrible system, but it is the best systeam humanity has developed so far.

Given the state of Thomas Jefferson’s own personal economic disaster, (not even free slave labor could save him), accept his brilliance in politics and science but don’t look for macroeconomic help. Additionally, our currency is controlled by a Treasury Secretary and Federal Reserve – all selected and voted on by our elected representatives – Congress.

Posted by m. plunkett | Report as abusive

Well the proven monetary cycle I know about is, Printing Press – Inflation assured in three years.

To many treasury bonds will make the milk watery in value and a two trillion deficit reached easily doesn’t help the leverage either.

Foreigners can not longer lend cause they are getting into financial dangers waters themselves now.

The problem now is on the demand side where credit is dry. A devaluation war is eminent.

Posted by Youri Carma | Report as abusive

If Mr. Saft thinks there is the remotest possibility that we can escape hyperinflation at this point in history, he hasn’t studied his history very well.

“And of course there is also the possibility that we will pass into a true period of equilibrium…

In the past, such periods have included the Renaissance, the Enlightenment and the prosperity of the Victorian period.”

Indeed, in each case also accompanied by an increase in the speed of communication.

At today’s rate of international communication, we’ll either reach the equilibrium of the turbulence of a high-pressure water faucet or the resonance of fine Austrian crystal.

Note, however, both equlibrium states are quite different in their effects.

Posted by mlee | Report as abusive

What planet do you live on?? Hope ia NOT a plan! When you print money – tons of money….inflation will follow..That you can depend on!

Posted by paul kalsbeek | Report as abusive

Oh Lordy, Negative Jim is in rolling in dead fish heaven now! “Black Death!” My God man, your negativity is astounding, even while you keep some of your personal funds in the markets. If things are really this bad then we should all just short every stock and fund we can find and we’ll all be billionaires within the year if Saft is right! Why isn’t Saft shorting all his personal finances? Hmmm. Doesn’t beleive his own negative spewing? Happy new year Jim!

Posted by Greg | Report as abusive

the monetary system itself is whats wrong
a fractional reserve system is what we run on and is
completely ridiculous. the federal reserve is a private entity no one is elected. money is backed by nothing and is created out of nothing the idea of legal tender is perpetual debt. so enjoy and see you in hell

What’s funny is that my wife and I have given back almost $1300.00 per month in wage cuts.We are fortunate enough to still have decent paying jobs.But we have accumilated some c/c debt.Even if we wanted to apply for some kind of loan,we would probably be turned down.Why doesn’t the government or some bank with my tax money give us an immeadiate very low intrest consolidation loan to improve our balance sheet and in the long run improve are spending power. I’m sure there are alot like us,still able to pay but unable to borrow.

Posted by ArthurPina | Report as abusive

Additionally, our currency is controlled by a Treasury Secretary and Federal Reserve – all selected and voted on by our elected representatives – Congress.
Posted by m. plunkett

Sorry to inform you Mr. Plunkett the Fed is not controlled by Congress . The Fed is not part of the government or cotrolled by the government. For more info go to : http://www.rense.com/politics6/fedres.ht m If this site is no help Google it and find out the ugly truth.

Posted by Tom Swartz | Report as abusive

No… it is about what we believe. We either believe that the government will manage to claw back on the deficit within an acceptable time frame, or like James we believe that the world is at an end and now the skies are gray, the flowers are dead and the birds have flown South. And like James, we can then drag out this tome and study it while we listen to La Traviata and drink cups of bitter wine.

As confidence flags, investors, brokers run around wanting guarantees. Well, I’m sorry James (and every other investor, broker and columnist in this space)… but is doesn’t work that way. If you want a guarantee, buy a toaster. Otherwise, play the game… after all, it is only money.

Posted by Quintin | Report as abusive

When facing a financial crisis, would your advisor recommend taking on more debt to get out of debt? You or I would consider that option to be ludicrous, yet the forthcoming administration believes this is sound financial policy; take on more debt, spend more, tax more, and print more money. Inflation and lower returns for investors are looming, dark and foreboding, upon the horizon. It is a scary thought that America may be heading for its first default. What happens when we can no longer boast a platinum credit rating?

Posted by Matthew | Report as abusive