Peter Schiff had it right back in 2006!!!

Peter Schiff called it like it is back in 2006 when everybody was saying everything was just fine. Of course many of these guys make money based on giving positive reports.

Light shed on economic depressions

Many lessons and anecdotes of history have been gleened from the Great Depression of the 1930's. I have a personal one to share. In the back of my yard exists an old chicken coop that was build during the depression as a means to generate some domestic econommy and self-reliance. This old chicken coop was first used to raise chickens, then later was used as an actual residence during the depression. Today, I use it to store 12 dry chords of fire wood for burning during the winter.

Analysis of the current economic contraction

The recent bank failures bring to mind comparisons with the great depression and other economic contractions that have occured across the globe. There is one comparison and one contrast I would like to make here that I think is instructive to consumers, investors, etc.

Economic Contractions can be spurred by many things:

1. War
2. mis-management of resources, capital, workforce etc; both on a personal level, corporate, and governmental fiscal and monetary level.
3. Poor farming season.
4. Reduced productivity of the workforce.
5. Trade imbalances.
6. dis-proportionate allocation of resources.
7. rapid regulation, rapid deregulation, fluid laws making unstable investment environment
8. Money supply changes (typically occurs with a fiat currency like US dollar)

Whatever the root cause of the problem, Economic contractions almost always result in the following three outcomes:

1. Lack of investor confidence; ie no lenders
2. Lack of consumer confidence; ie no buyers of goods and services - too many sellers - too much inventory
3. Lack of productivity; no employment or underemployment

The three outcomes listed above will rear their ugly heads in different ways as the economy goes through the contractive cycle including inflation, hyper-inflation, then extended period of deflation.

The current economy is complex enough that one part of the econmy can go through inflation like commodity prices, while the housing prices go through a severe deflation. I believe this is having the effect of reducing the impact to the individual pocket book.

But the economy will continue to contract as credit lines are removed, consumers stop buying stuff, and jobs don't pay. In this environment, Gold, Commodities, durable goods will be king I think as the cash under the matress diminishes in value. Keep in mind that if deflation becomes severe, then even durable goods will no longer be a safe haven. Just my two cents.

I hope my friends are on the winning side of the line during this economic contraction. Oil shocks may come, commodity prices will go up, but if we are prepared, we will be okay. Hope this posting helps.

Excellent Economic Blogs

I am adding links to my favorite blogs and economic journals that I feel provide good information to the average lay person, who has a general knowlege of economics. The List is as follows:

http://globaleconomicanalysis.blogspot.com/

http://www.economist.com/

http://paper-money.blogspot.com/

I've been studying money flows and the projected money flows in the future and these sites are proving to provide this lay-man with good information. I'll provide a detailed analysis in a later post.

Economic Journal Kickoff

This blog is being established to document one man's perspective on the current World, US Region, and local economic situation.

We are entering a challenging time period of World history. The economy has become ever complex and people have lost faith in traditional news outlets for reliable analysis on what is going on in the world. This blog seeks to remedy that problem by providing a ground truth, "here's how it affects me personally" perspective.

This blog also serves as a journal of world events that any economic significance. Wars, matters of government, Policy decisions, and other economic news will be documented. Feel free to contribute to this blog by emailing your articles to vision.2012.economy@blogger.com.