After the Storm

Via Jack

With all the study and thought that are required to make sense out of how the Great Unraveling will play out, we seldom take time to think of what it will be like on the other side. Those of us who are, by nature, long-term thinkers and/or optimistic, have a vague picture in mind of a rebirth of libertarian thinking, and a vibrant economy. However, we tend not to think too much more about these hopes than that, because we are caught up in the Great Unraveling itself - a very time-consuming topic.

The other day, an associate whom I like to think of as having a decent, if not holistic, view of the present depression, commented to me, "I wish we could just have the crash tomorrow and everything that goes with it, so that, next year, we can get back to normal."

Oops ... maybe his expectations are a bit more simplified than I thought. And, if others share his view, possibly the topic needs a bit of fleshing-out. While it may not be ready to be a prime topic of the ongoing conversation, possibly an outline of what may happen after all the fireworks have gone off would be in order.

Ten Years Down and Ten Years Up

Economic wizard (and favourite 'Uncle') Harry Schultz stated back in the early 2000's that what he anticipated was "ten years down and ten years up." At the time, many thought that his projection was extremely prolonged. I didn't think so. People do commonly seem to take the view that, once the various crashes have taken place, we simply walk out into the sun, brush the dirt off the knees of our trousers, and, with a spring in our step, walk into the bright new day.

However, a depression is not at all like that. It is more like a town after a hurricane has hit. The storm may have been swift, but the recovery is not. Power lines are down. Roads are blocked. Homes and stores have been destroyed. Having personally been highly involved in the reconstruction of a small country after the devastation wrought by a category five hurricane, I can attest that, even if the population is hardworking and motivated (which they were), the task of rebuilding is monumental, and the time period required to achieve it is prolonged.

I see the period after the various crashes very differently from those who anticipate immediate recovery symptoms. This is not because I imagine myself a visionary; my view is based on history. If we look at the economic collapses of the past, (inclusive of their possible knock-on effects, such as hyperinflation and destruction of the currency), from the fall of the Roman Empire to Weimar Germany, to Argentina and Zimbabwe - take your pick - the pattern is extremely similar.

So, let's have a look at that pattern and ask ourselves if the present situation might not play out much the same (except far worse and more prolonged, as the conditions that led to this particular depression have been more extreme). The various stages are likely to be a given, but the various factors within each stage are a bit more uncertain. In every major economic collapse, some combination of these factors takes place.

Also, consider that the stages themselves are like dominoes - they almost always fall in order. The reason? Details change in history, but human nature remains the same. The same knee-jerk reactions by people will repeat themselves over and over. (As an example, we are now experiencing a decline in exports from the First World. I believe that a repeat of the disastrous Smoot-Hawley Tariff of the 1930's will be passed in America, which undoubtedly would trigger increased hardship for Americans.)

Stages of The Crash

The stages are laid out below. The first three have already occurred.

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