The U.S. Greater Depression Exposed (Part II)

February 23, 2014

Part I of this series laid out the three conclusions which would be established:

  • The U.S. economy is currently in the midst of a Greater Depression; the worst sustained economic collapse in the history of that nation.
  • Given this collapse; the U.S. does not have one of the world’s stronger economies, but rather it has the weakest economy of any/all major nations.
  • The downward spiral in this Greater Depression is, in fact, a terminal collapse. The final result of this economic devolution can only mean the transformation of the United States into essentially a “Third World Nation”.

The prequel to this provided part of the basis for the first conclusion. It began by showing how one could pretend that an economy which was actually shrinking rapidly was instead “growing” rapidly, by doing nothing more than falsifying one number: the rate of inflation.

This was followed by unequivocal evidence in the form of two pairs of charts. The first pair of charts showed how the U.S. government lies-with-numbers in the realm of employment. One chart, containing “adjusted” (i.e. falsified) data, showed the U.S. economy (supposedly) creating new jobs, month after month, year after year.

That first chart was/is the only data which the Corporate media ever shows to the general public. It was then followed by second a chart, which the general public never sees. This second chart contains unadjusted data (i.e. data which cannot be falsified), which showed conclusively that the U.S. has been losing jobs, for virtually every month of the supposed recovery.

Similarly; the second pair of charts separated fact-from-fiction in the U.S. housing sector. While the propaganda machine attempts to peddle the myth that there is a “new housing boom” in the U.S.; the reality is that the housing depression which began back in 2007 continues, with (real) housing activity merely equaling the worst levels of any/all previous crashes in this sector.

This last installment will focus primarily on only two pieces of data. However, they are sufficiently persuasive to not only fully establish the first conclusion, but the second and third conclusions as well.

The first data concerns U.S. energy consumption. There are a number of unequivocal “truths” when it comes to economics, and the dynamics of our (modern) economies. One of these Truths is that growing economies require more energy. The source of such growth in demand is two-fold.

On the consumption side; any increase in consumption necessarily implies using more energy. First there is the energy used to produce the good or service; then there is the additional energy required for transportation – either transporting the customer to the good/service, or transporting the good/service to the customer. Thus even a rise in “on-line shopping” still implies using more energy.

Then there is industry. Not only does increasing industrial output inevitably mean using more energy on a day-to-day to basis, but upgrading technology and/or increasing capacity generally requires even more significant energy expenditures. This is why Big Oil and the Corporate media were warning Americans for years (and as recently as April 2007) that the U.S. would soon hit a “refining crunch”, with respect to domestic refineries simply attempting to meet the U.S.’s own, ravenous demand for energy. Then the Greater Depression arrived.

Today, in typically Machiavellian fashion; the U.S. government and its media parrots boast that the U.S. is now a “net energy exporter”. It’s still importing lots of oil. However; U.S. demand for petroleum products has collapsed to such an extent that U.S. refineries now export so much of their output that it exceeds oil imports.

Again, the moment we come across data which cannot be “adjusted” (and thus falsified), we see an economy in collapse. Growing economies need more energy, generally much more. The U.S. economy is using much less energy – in every category of demand/consumption. Ipso facto, the U.S. economy is shrinking, not growing.

Then we have the second piece of data. While applying metaphors to economic statistics or phenomena is often a dubious undertaking, occasionally we find “a good fit”. Such is the case with the U.S. velocity of money and the human heart-rate. Observe the chart below:

Notice how back when the U.S. had (relatively) “normal” economic conditions (until 1990) that the chart of the U.S.’s velocity of money even looked like a monitor of the human heart-rate. It zig-zagged up and down, within safe/sane parameters. Then the One Bank’s bubble-makers went to work.

In the pedal-to-the-metal, economic over-stimulation which drove the “dot-com bubble” (at the time, the largest bubble in history); we see the chart of this dangerously over-stimulated economy looking like a dangerously over-stimulated heart. Then we see the inevitable collapse.

A near-vertical drop (a heart-attack?), greater in magnitude than any previous contraction in money-velocity continued until a new/greater campaign of over-stimulation began: the even more gigantic U.S. housing-bubble. Yet one would never know this by looking at the chart above. Despite this even greater injection of stimulation; the U.S. economy (i.e. heart) was still so exhausted from the previous over-stimulation that the reversal of the previous decline in velocity of money was (in hindsight) little more than “a dead-cat bounce.”

Let me repeat this. Despite what was (at the time) the most insanely over-stimulated economy ever seen, the massive collection of housing-based U.S. economic bubbles produced nothing more than a dead-cat bounce – which was immediately followed by an even steeper, even longer collapse (a bigger heart-attack?) in the velocity of money.

Clearly, we now had a U.S. heart/economy which was so severely damaged that it was totally incapable of functioning in anything resembling a normal manner. As the Crash of ’08 was in the process of dragging U.S. money-velocity from its insanity-peak back toward the lowest levels in recorded history; this is when the U.S.’s economic (witch) doctors introduced us to “quantitative easing” and a (permanent) 0% U.S. interest rate.

This dual combination of ultra-extreme monetary policies was the infamous “helicopter drop”, discussed in a previous academic paper which earned B.S. Bernanke his original nickname. Bernanke and the Fed were figuratively raining ‘money’ down from the sky, in near-infinite quantities – all of it landing in the vaults of Wall Street (and all of it completely worthless).

These extreme, permanent, “emergency” policies produced a chart which is now burned into the minds of all regular readers.

Yet this vertical/extreme/unprecedented monetary stimulation produced nothing more than a tiny hiccup in money-velocity/heart-beat, before it resumed its steep decline (a final heart-attack?). For two years now; the U.S. velocity of money/heart-beat has been plummeting lower than any previous lows in recorded history, while the most-extreme monetary stimulus ever contemplated continues.

To revisit a previous analogy; we have monetary stimulus so extreme it is equivalent to an economic “defibrillator”. Yet despite using this monetary defibrillator on the U.S. economy, continuously, for five years; it barely produced a twitch in the heart-rate, and no “twitch” at all for the last, four years. These monetary (witch) doctors are no longer  “stimulating a patient” with their defibrillator, they are simply charring a corpse.

While the realm of economics has no terminology to even describe the sort of extreme, monetary voodoo practiced by Fed witch doctors over the past five years, they do have a term for the result: “pushing on a string”. While “pushing on a string” is a less-extreme metaphor than defibrillating a corpse; in conceptual terms the two are identical. No matter how much additional push/force is applied, it will have zero effect.

Note that a human being kept alive purely by artificial means will still exhibit stability of its “vital signs” (including heart-rate). But there is not the slightest sign of stability (or even life) in the chart of the U.S.’s heart-beat, just a continued, sickening descent.

In claiming to now be “tapering” its monetary stimulus (another lie); we have the Federal Reserve effectively throwing in the towel. The witch doctors are not even contemplating any new voodoo to try to resuscitate their patient. If the U.S. economy was really a human being, Last Rites would have already been administered.

Jeff Nielson

Jeff Nielson is co-founder and managing partner of Bullion Bulls Canada; a website which provides precious metals commentary, economic analysis, and mining information to readers/investors. Jeff originally came to the precious metals sector as an investor around the middle of last decade, but soon decided this was where he wanted to make the focus of his career. His website is

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