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April 13, 2020 | Still Stuck in the Debt-Demand Feedback Loop….The Great Deflation

Jack has over 20 years experience in the currency, equity, and futures arena. He is an investment advisor who has held key positions in brokerage, money management, trading, and research. Jack is founder and president of Black Swan Capital LLC. He was also founder of Ross International Asset Management (specializing in global stock, bond, and currency asset management for retail clients) and General Manager of Plexus Trading (specializing in currency futures and commodities trading).

Below is a slide I shared at a presentation back in 2015 as the real economy was supposedly healing after the credit crunch.  My point was we were indeed showing some progress, but from a macro standpoint we were still stuck in an ugly debt-demand feed-back loop; i.e. relying on increasing amounts of credit and leverage to supplement for a dearth of real demand.  It is not going far out on a limb to suggest we are now much deeper locked into this dynamic and the great deflation is upon us. Note the box to the right in the slide (reprinted below), which is a summary description from Murray Rothbard’s book, The Great Depression, showing how to prolong a depression. Sound familiar?

Debt demand feedback loop.png

How to prolong a depression (Murray Rothbard):

•      Prevent or delay liquidation.

•      Inflate further.

•      Keep wages up.

•      Keep prices up.

•      Stimulate consumption and discourage savings.

And the beat down goes on and on…

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April 13th, 2020

Posted In: Black Swan Currency Currents

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