Visualizing The World's Most Famous Case Of Deflation, Part 1

The Great Depression was the most severe economic depression ever experienced by the Western world.

As VisualCapitalist notes, it was during this troubled time that the world’s most famous case of deflation also happened. The resulting aftermath was so bad that economic policy since has been chiefly designed to prevent deflation at all costs.

 

Courtesy of: The Money Project

 

Setting the Stage

The transition from wartime to peacetime created a bumpy economic road after World War I.

Growth has hard to come by in the first years after the war, and by 1920-21 the economy fell into a brief deflationary depression. Prices dropped -18%, and unemployment jumped up to 11.7% in 1921.

However, the troubles wouldn’t last. During the “Roaring Twenties”, economic growth picked up as the new technologies like the automobile, household appliances, and other mass-produced products led to a vibrant consumer culture and growth in the economy.

More than half of the automobiles in the nation were sold on credit by the end of the 1920s. Consumer debt more than doubled during the decade.

While GDP growth during this period was extremely strong, the Roaring Twenties also had a dark side. Income inequality during this era was the highest in American history. By 1929, the income of the top 1% had increased by 75%. Income for the rest of people (99%) increased by only 9%.

The Roaring Twenties ended with a bang. On Black Thursday (Oct 24, 1929), the Dow Jones Industrial Average plunged 11% at the open in very heavy volume, precipitating the Wall Street crash of 1929 and the subsequent Great Depression of the 1930s.

The Cause of the Great Depression

Economists continue to debate to this day on the cause of the Great Depression. Here’s perspectives from three different economic schools:

Keynesian:

John Maynard Keynes saw the causes of the Great Depression hinge upon a lack of aggregate demand. This later became the subject of his most influential work, The General Theory of Employment, Interest, and Money, which was published in 1936.

Keynes argued that the solution was to stimulate the economy through some combination of two approaches:
1. A reduction in interest rates (monetary policy), and
2. Government investment in infrastructure (fiscal policy).

“The difficulty lies not so much in developing new ideas as in escaping from old ones.” – John Maynard Keynes

Monetarist:

Monetarists such as Milton Friedman viewed the cause of the Great Depression as a fall in the money supply.

Friedman and Schwartz argue that people wanted to hold more money than the Federal Reserve was supplying. As a result, people hoarded money by consuming less. This caused a contraction in employment and production since prices were not flexible enough to immediately fall.

“The Great Depression, like most other periods of severe unemployment, was produced by government mismanagement rather than by any inherent instability of the private economy.” ? Milton Friedman

Austrian:

Austrian economists argue that the Great Depression was the inevitable outcome of the monetary policies of the Federal Reserve during the 1920s.

In their opinion, the central bank’s policy was an “easy credit policy” which led to an unsustainable credit-driven boom.

“Any increase in the relative size of government in the economy, therefore, shifts the societal consumption-investment ratio in favor of consumption, and prolongs the depression.” – Murray Rothbard

The Great Depression and Deflation

Between 1929 and 1932, worldwide GDP fell by an estimated 15%.

Deflation hit.

Personal income, tax revenue, profits and prices plunged. International trade fell by more than 50%. Unemployment in the U.S. rose to 25% and in some countries rose as high as 33%.

These statistics were only the tip of the iceberg. Learn about the full effects, the stories, and the recovery from the Great Depression in Part 2.

The Money Project aims to use intuitive visualizations to explore ideas around the very concept of money itself. Founded in 2015 by Visual Capitalist and Texas Precious Metals, the Money Project will look at the evolving nature of money, and will try to answer the difficult questions that prevent us from truly understanding the role that money plays in finance, investments, and accumulating wealth.

Facebook's War On Freedom Of Speech

Submitted by Douglas Murray via The Gatestone Institute,

  • Facebook is now removing speech that presumably almost everybody might decide is racist — along with speech that only someone at Facebook decides is “racist.”

  • The sinister reality of a society in which the expression of majority opinion is being turned into a crime has already been seen across Europe. Just last week came reports of Dutch citizens being visited by the police and warned about posting anti-mass-immigration sentiments on social media.

  • In lieu of violence, speech is one of the best ways for people to vent their feelings and frustrations. Remove the right to speak about your frustrations and only violence is left.

  • The lid is being put on the pressure cooker at precisely the moment that the heat is being turned up. A true “initiative for civil courage” would explain to both Merkel and Zuckerberg that their policy can have only one possible result.

It was only a few weeks ago that Facebook was forced to back down when caught permitting anti-Israel postings, but censoring equivalent anti-Palestinian postings.

Now one of the most sinister stories of the past year was hardly even reported. In September, German Chancellor Angela Merkel met Mark Zuckerberg of Facebook at a UN development summit in New York. As they sat down, Chancellor Merkel’s microphone, still on, recorded Merkel asking Zuckerberg what could be done to stop anti-immigration postings being written on Facebook. She asked if it was something he was working on, and he assured her it was.

At the time, perhaps the most revealing aspect of this exchange was that the German Chancellor — at the very moment that her country was going through one of the most significant events in its post-war history — should have been spending any time worrying about how to stop public dislike of her policies being vented on social media. But now it appears that the discussion yielded consequential results.

Last month, Facebook launched what it called an “Initiative for civil courage online,” the aim of which, it claims, is to remove “hate speech” from Facebook — specifically by removing comments that “promote xenophobia.” Facebook is working with a unit of the publisher Bertelsmann, which aims to identify and then erase “racist” posts from the site. The work is intended particularly to focus on Facebook users in Germany. At the launch of the new initiative, Facebook’s chief operating officer, Sheryl Sandberg, explained that, “Hate speech has no place in our society — not even on the internet.” She went to say that, “Facebook is not a place for the dissemination of hate speech or incitement to violence.” Of course, Facebook can do what it likes on its own website. What is troubling is what this organization of effort and muddled thinking reveals about what is going on in Europe.

The mass movement of millions of people — from across Africa, the Middle East and further afield — into Europe has happened in record time and is a huge event in its history. As events in Paris, Cologne and Sweden have shown, it is also by no means a series of events only with positive connotations.

As well as being fearful of the security implications of allowing in millions of people whose identities, beliefs and intentions are unknown and — in such large numbers — unknowable, many Europeans are deeply concerned that this movement heralds an irreversible alteration in the fabric of their society. Many Europeans do not want to become a melting pot for the Middle East and Africa, but want to retain something of their own identities and traditions. Apparently, it is not just a minority who feel concern about this. Poll after poll shows a significant majority of the public in each and every European country opposed to immigration at anything like the current rate.

The sinister thing about what Facebook is doing is that it is now removing speech that presumably almost everybody might consider racist — along with speech that only someone at Facebook decides is “racist.”

And it just so happens to turn out that, lo and behold, this idea of “racist” speech appears to include anything critical of the EU’s current catastrophic immigration policy.

By deciding that “xenophobic” comment in reaction to the crisis is also “racist,” Facebook has made the view of the majority of the European people (who, it must be stressed, are opposed to Chancellor Merkel’s policies) into “racist” views, and so is condemning the majority of Europeans as “racist.” This is a policy that will do its part in pushing Europe into a disastrous future.

Because even if some of the speech Facebook is so scared of is in some way “xenophobic,” there are deep questions as to why such speech should be banned. In lieu of violence, speech is one of the best ways for people to vent their feelings and frustrations. Remove the right to speak about your frustrations, and only violence is left. Weimar Germany — to give just one example — was replete with hate-speech laws intended to limit speech the state did not like. These laws did nothing whatsoever to limit the rise of extremism; it only made martyrs out of those it pursued, and persuaded an even larger number of people that the time for talking was over.

The sinister reality of a society in which the expression of majority opinion is being turned into a crime has already been seen across Europe. Just last week, reports from the Netherlands told of Dutch citizens being visited by the police and warned about posting anti-mass-immigration sentiments on Twitter and other social media.

In this toxic mix, Facebook has now — knowingly or unknowingly — played its part. The lid is being put on the pressure cooker at precisely the moment that the heat is being turned up. A true “initiative for civil courage” would explain to both Merkel and Zuckerberg that their policy can have only one possible result.

These Vancouver Homes Sold For Millions In 2011 And Have Been Vacant And Rotting Since: Here's Why

Five years ago, in July of 2011, the house at 4182 West 8th Avenue in Vancouver in sold for $4.6 million. It now rests vacant, abandoned and rotting.

 

Six years ago this $6.2-million Point Grey home boasted unobstructed vistas of the North Shore mountains, English Bay and Vancouver’s skyline. A park sits across a quiet street. The home represents everything a family could aspire to.

As the National Post reports, it too is vacant and rotting. Windows have been left open and debris sits in the yard. Like a symbol of futility, a June 2015 City of Vancouver “untidy-premises” order remains pinned to the door.

 

The two formerly multi-million mansions devolving to derelict status is not the only thing they share in common: a second uniting feature is what they were meant to become once they were purchased half a decade ago – a store of wealth to Chinese investors eager to park “hot money” outside of their native country, and bid up any Canadian real estate they could get their hands on.

And then the investors disappeared.

The Point Grey property stopped functioning as a home and became a storage of wealth six years ago, according to property documents and a neighbour’s account.

It was well-cared for in 2010 when it was sold to an investor. Since then it has been flipped through a property transfer in a Beijing law office and left unoccupied.

Current owners of the other vacant property residing on the 4100-block 8th Avenue West home are Huai Can Ren and Xue Pei Sun. They bought the home from Wei Min Zhang in July 2011 for $4.6 million. 

The couple’s occupations were both listed as “business person.” Wei Min Zhang had bought the home in July 2010 for $3.35 million.

Since the purchase, the current “owners” have not been seen.

City hall is currently trying to estimate how many Vancouver homes are vacant. And these online communities are anecdotally gathering photo evidence and coming to conclusions that offshore investment is to blame.

In other words, the “Chinese.”

“That is what is driving everything,” said Caroline Adderson, whose website, Vancouver Vanishes, has over 8,000 followers. “It is sickening on all levels.”

City of Vancouver spokesman Tobin Postma said a 2015 order to clean up the property was “remedied.” However the order remains pinned to the property and messy conditions appear to continue, according to a reporter’s observations Wednesday.

 

Postma said city departments respond to safety and mess complaints at vacant homes and issue cleanup orders in warranted cases.

 

If owners don’t respond, the city will clean up and issue a bill. In 2014, there were 213 actions taken against 85 properties, Postma said.

Huai Can Ren and Xue Pei Sun are also owners of a $3.57-million Arbutus Ridge home in the 2300-block 21st Avenue West, records show.

The home also appears to be unoccupied: on Wednesday, a Postmedia reporter found that the windows were shuttered, a phone book was left on the doorstep and a mailbox was stuffed with letters. No one answered the door and the home’s external condition seemed degraded.

Huai Can Ren, then listed as “businessman,” and Xue Pei Sun, as “homemaker,” bought the home in 2006 for $1.75 million from transferees Zhaohong Su and Xin Li.

In transfer documents, Xin Li was listed as lawyer for Su, who had bought the home in 2005 for $778,000.

Needless to say the locals are furious with this increasing incidence of derelict houses, which destroy neighborhood character. They are also confused how this is allowed to go on.

And in case it is unclear what “this”, what is happening is quite simple:

  1. Chinese investors smuggled out millions in embezzled cash, hot money or perfectly legal funds, bypassing the $50,000/year limit in legal capital outflows.
  2. They make “all cash” purchases, usually sight unseen, using third parties intermediaries to preserve their anonymity, or directly in perso, in cities like Vancouver, New York, London or San Francisco.
  3. The house becomes a new “Swiss bank account”, providing the promise of an anonymous store of value and retaining the cash equivalent value of the original capital outflow.
  4. Then the owners disappear, never to be heard from or seen again.

As more Chinese scramble to engage and repeat if only the first three steps, the price of local housing, which is merely a store of value to price indiscriminate foreign buyers, soars while it makes home purchases for the domestic population prohibitively expensive and virtually impossible.

The end result, in the case of Vancouver, is this:

 

We, and the local residents of Vancouver wonder, “how much longer will such money laundering fraud be permitted?

22 Signs That The Global Economic Turmoil We Have Seen So Far In 2016 Is Just The Beginning

Submitted by Michael Snyder via The Economic Collapse blog,

As bad as the month of January was for the global economy, the truth is that the rest of 2016 promises to be much worse.  Layoffs are increasing at a pace that we haven’t seen since the last recession, major retailers are shutting down hundreds of locations, corporate profit margins are plunging, global trade is slowing down dramatically, and several major European banks are in the process of completely imploding.  I am about to share some numbers with you that are truly eye-popping.  Each one by itself would be reason for concern, but when you put all of the pieces together it creates a picture that is hard to deny. 

The global economy is in crisis, and this is going to have very serious implications for the financial markets moving forward.  U.S. stocks just had their worst January in seven years, and if I am right much worse is still yet to come this year.  The following are 22 signs that the global economic turmoil that we have seen so far in 2016 is just the beginning…

1. The number of job cuts in the United States skyrocketed 218 percent during the month of January according to Challenger, Gray & Christmas.

2. The Baltic Dry Index just hit yet another brand new all-time record low.  As I write this article, it is sitting at 303.

3. U.S. factory orders have now dropped for 14 months in a row.

4. In the U.S., the Restaurant Performance Index just fell to the lowest level that we have seen since 2008.

5. In January, orders for class 8 trucks (the big trucks that you see shipping stuff around the country on our highways) declined a whopping 48 percent from a year ago.

6. Rail traffic is also slowing down substantially.  In Colorado, there are hundreds of train engines that are just sitting on the tracks with nothing to do.

7. Corporate profit margins peaked during the third quarter of 2014 and have been declining steadily since then.  This usually happens when we are heading into a recession.

8. A series of extremely disappointing corporate quarterly reports is sending stock after stock plummeting.  Here is a summary from Zero Hedge of a few examples that we have just witnessed…

  • SHARES OF LIONS GATE ENTERTAINMENT FALL 5 PCT IN EXTENDED TRADE AFTER QUARTERLY RESULTS – RTRS
  • TABLEAU SOFTWARE SHARES TUMBLE 40 PCT IN AFTER HOURS TRADING – RTRS
  • YRC WORLDWIDE SHARES DOWN 16.4 PCT AFTER THE BALL FOLLOWING RESULTS – RTRS
  • SPLUNK INC SHARES DOWN 7.6 PCT IN AFTER HOURS TRADING – RTRS
  • LINKEDIN SHARES EXTEND DECLINE, DOWN 24 PCT AFTER RESULTS, GUIDANCE – RTRS
  • HANESBRANDS SHARES FURTHER ADD TO LOSSES IN EXTENDED TRADE, LAST DOWN 14.9 PCT – RTRS
  • OUTERWALL SHARES FALL 11 PCT IN EXTENDED TRADING AFTER QUARTERLY RESULTS – RTRS
  • GENWORTH SHARES DOWN 16.5 PCT AFTER THE BELL FOLLOWING RESULTS, RESTRUCTURING PLAN

9. Junk bonds continue to crash on Wall Street.  On Monday, JNK was down to 32.60 and HYG was down to 77.99.

10. On Thursday, a major British news source publicly named five large European banks that are considered to be in very serious danger…

Deutsche Bank, Credit Suisse, Santander, Barclays and RBS are among the stocks that are falling sharply sending shockwaves through the financial world, according to former hedge fund manager and ex Goldman Sachs employee Raoul Pal.

11. Deutsche Bank is the biggest bank in Germany and it has more exposure to derivatives than any other bank in the world.  Unfortunately, Deutsche Bank credit default swaps are now telling us that there is deep turmoil at the bank and that a complete implosion may be imminent.

12. Last week, we learned that Deutsche Bank had lost a staggering 6.8 billion euros in 2015.  If you will recall, I warned about massive problems at Deutsche Bank all the way back in September.  The most important bank in Germany is exceedingly troubled, and it could end up being for the EU what Lehman Brothers was for the United States.

13. Credit Suisse just announced that it will be eliminating 4,000 jobs.

14. Royal Dutch Shell has announced that it is going to be eliminating 10,000 jobs.

15. Caterpillar has announced that it will be closing 5 plants and getting rid of 670 workers.

16. Yahoo has announced that it is going to be getting rid of 15 percent of its total workforce.

17. Johnson & Johnson has announced that it is slashing its workforce by 3,000 jobs.

18. Sprint just laid off 8 percent of its workforce and GoPro is letting go 7 percent of its workers.

19. All over America, retail stores are shutting down at a staggering pace.  The following list comes from one of my previous articles

-Wal-Mart is closing 269 stores, including 154 inside the United States.

-K-Mart is closing down more than two dozen stores over the next several months.

-J.C. Penney will be permanently shutting down 47 more stores after closing a total of 40 stores in 2015.

-Macy’s has decided that it needs to shutter 36 stores and lay off approximately 2,500 employees.

-The Gap is in the process of closing 175 stores in North America.

-Aeropostale is in the process of closing 84 stores all across America.

-Finish Line has announced that 150 stores will be shutting down over the next few years.

-Sears has shut down about 600 stores over the past year or so, but sales at the stores that remain open continue to fall precipitously.

20. According to the New York Times, the Chinese economy is facing a mountain of bad loans that “could exceed $5 trillion“.

21. Japan has implemented a negative interest rate program in a desperate attempt to try to get banks to make more loans.

22. The global economy desperately needs the price of oil to go back up, but Morgan Stanley says that we will not see $80 oil again until 2018.

It is not difficult to see where the numbers are trending.

Last week, I told my wife that I thought that Marco Rubio was going to do better than expected in Iowa.

How did I come to that conclusion?

It was simply based on how his poll numbers were trending.

And when you look at where global economic numbers are trending, they tell us that 2016 is going to be a year that is going to get progressively worse as it goes along.

So many of the exact same things that we saw happen in 2008 are happening again right now, and you would have to be blind not to see it.

Hopefully I am wrong about what is coming in our immediate future, because millions upon millions of Americans are not prepared for what is ahead, and most of them are going to get absolutely blindsided by the coming crisis.

Volcano Erupts "Spectacularly" 50km From Japanese Nuclear Plant

Last August, in a hilarious example of bad timing, Japan restarted its first nuclear reactor since the Chernobyl redux at Fukushima just as a nearby volcano was set to erupt.

Sakurajima, one of the country’s most active volcanos, erupts almost constantly, but experts warned the next eruption could be “the big one”, so to speak.

At the time, The Japan Meteorological Agency raised the warning level from 3 to 4.

4 means “prepare to evacuate.”

“The possibility for a large-scale eruption has become extremely high for Sakurajima,” the Agency said. As for what fate would befall someone who failed to heed an evacuation warning, well let’s just say that molten stones “could rain down on areas near the mountain’s base.”

As we noted, the real problem is Sakurajima’s location – it’s just 50 kilometers from the Sendai nuclear power plant.

On Friday Sakurajima erupted at 7 p.m. local time. 

“The Meteorological Agency banned entry to the area, expanding an existing no-go zone around the crater to a 2-kilometer (1.2-mile) radius,” AP reports, adding that “Friday’s eruption, while dramatic, was average compared to Sakurajima’s past eruptions” including the last incident in September.

Here are the visuals.

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— ???????? (@nhk_seikatsu) February 5, 2016

For now no injuries have been reported and there’s apparently no threat to Sendai which RT reminds us is only “built to withstand a tsunami of 15 meters, well below 2011’s peak tsunami height of 40 meters.”

Kyoto University volcanologist Kazuhiro Ishihara says everything should be fine, but “of course we must keep monitoring the volcanic activity.”

Yes, “of course” we should. Because as we documented last year, Sendai’s operators and local authorities have no comprehensive plan to evacuate residents in the event of a meltdown. We close with a quote from Yoshitaka Mukohara, a representative of a group who opposed the Sendai restart:

“There are schools and hospitals near the plant, but no one has told us how children and the elderly would be evacuated.

 

“Naturally there will be gridlock caused by the sheer number of vehicles, landslides, and damaged roads and bridges.”