The Great Recession




Inflation / Deflation & Fiat Money

Gold & Silver

Fixing The Problem

Our Current Downturn

Nearterm Outlook

  Real Estate





Deflationary depressions are strong economic downturns in which the price of just about everything goes down: stocks, real estate, commodities, wages, etc.  The only thing that really goes up is the value of fiat currency as you are able to purchase more goods with same amount of money.  Deflationary depressions result from interaction of bankruptcies and fractional reserve banking - banks go bankrupt which reduces the money supply and hence prices come down.  The 1930's saw a reduction in the money supply by 30% and prices decreased by an even far greater amount for many assets and commodities.

Although you may not be a fan of Glenn Beck, the following interview with Walter Zimmerman (an analyst) is the best description that I've found so far of a Deflationary Depression:

  1. Glen Beck / Walter Zimmerman 1
  2. Glen Beck / Walter Zimmerman 2
  3. Glen Beck / Walter Zimmerman 3
  4. Glen Beck / Walter Zimmerman 4

So, in summary expect:

The Great Depression is an example of deflationary depression in which asset prices dropped anywhere from 60% to 90%.  Japan also went a similar type of downturn during the 1990's with real estate losing up to 70% of it's value and the stock market dropping 90%.

Additional sources

  1. "Conquer the Crash" - Robert R Prechter Jr
  2. "Anatomy of the Bear" - Russell Napier