Book Review: The Return of the Great Depression By Vox Day

I saw “The Return of the Great Depression” advertised on Kindle for $1.59 and I couldn’t pass it up.  I’m glad I didn’t.  The book was published October 29, 2009 and is just slightly out of date, because we have a lot more money spent on QEs and the national debt has ballooned $4 trillion.

Vox Day graduated in 1990 from Bucknell University with degrees in Economics and Asian Studies. He is a blogger at  Vox Popoli blog.In Chapter 10 he outlines six scenarios for the near, economic future of the U.S. and lists their probability.

Scenario 1 is St. Bernanke and the Green Shoots.  This is the one favored by the Blue Chip Consensus, economists from the IMF, Donald Luskin and the Wall Street economists.  This is the “V” shaped recovery.  Probability nil.

Scenario 2 is The Jobless Recovery (or the “U” shaped recovery).  They include the likes of Paul Krugman and Joseph Stigletz who don’t believe the U.S. has stimulated enough. Considered to be too optimistic by the author.

Scenario 3 is the Whiskey Zulu India or the hyper-inflation.  Proponents of this scenario include Jim Rogers, Marc Faber, Jim Sinclair, Peter Schiff, Bill Fleckenstein to name a few; classical economists of the Austrian School.  The author believes this scenario is the most likely except that commodities collapsed along with oil and precious metals at the time the book was published.

Scenario 4 is The Great Recession. Proponents here include Stephen Roach, Bill Gross and Robert Reich.

Scenario 5 is Great Depression 2.0. This scenario is the one the author favors, including Mish Shedlock. One in which debt is deflationary and leaves us with a depression that is 35% worse than the 1930s variety.

Scenario 6 is Fallout 4 Live.  The second least-likely scenario is Armageddon

I favor the Whiskey Zulu India scenario. Commodities have made a recovery from 2009 and are setting new highs in corn, wheat, soybeans, oil and the CRB index. Silver has closed over $46 today and the author says in order for this scenario to be correct, we would need to see Gold over $1,500 by the end of 2010. Well, we missed it by four months. That’s close enough for me. I don’t believe the government’s figures and think inflation is much worse that announced and that consequently shows us that GDP is not increasing. Expect more QE ad infinitum!

Welcome Dollar Collapse!

12 Responses to “Book Review: The Return of the Great Depression By Vox Day”

  1. Sorry, but without rising wages , the commodity speculators are in a tulip bubble. They will have thier collective a** handed to them and then we will see the emergence of the new economy. We have seen this in housing and we will see it in everything else.
    The price of everything can only eventually be tied to what the market will ultimately bear . Econ 101
    By Jeff DeClercq
    Sunrise Construction
    Washington State.

  2. Jeff, it has nothing to do with rising wages or the lack thereof. It has to do with the currency being destroyed. The commodities like gold, silver and oil are not increasing, but the dollar is being debased.

  3. No matter what a dollar is worth, if you dont have them or cant get them, goods and services , which rely on commodities will suffer. While i agree that the dollar is being debased, so is every other currency, Untill we are forced to devalue, this argument does not tread water in my opinion. Demand has always been the ultimate moderator and always will be. If our currency is in such dire straights , why can you buy a house in florida for $50,000 cash. I rest my case

  4. Sorry Jeff, I don’t understand your argument or logic. Please try again to make me understand.

  5. Please dont misunderstand me , i have great respect for the opinions of the great minds of the day, it is just that i live on the ground here, so i guess my prediction, from a laymens point of view, is.
    1) The commodity super cycle will be the source of the next financial crisis. This time we will not be bailing out those who provide derivatives to insure against downside risk.
    2) This is going to severley cripple the large institutions which are now involved in the speculation of higher priced commoditys.
    3) The price of oil and other commodities we use will fall.
    4) This will be the best form of stimulation to the economy we have seen in years and the rebalancing of debt and the ability to borrow will reach an equlibrium tied to the ability of borrowers to pay.
    5) Since our economy is credit based, market forces will prevail according to the ability of people to pay for goods and services as well as hard assetts.
    Finally thank you for your response and allowing me to debate this issue.

  6. Jeff,

    You sound like you are familiar with history… study the Weimar republic hyperinflation of the 1920’s.. The scenario is very similar…In 1920 Germany.. Gold, food stuffs, and other commodities did rise against the Mark.. and wages actually fell… The small businesses could not keep up with rising costs while keeping their prices attractive.. and therefore reduced their workforces.. and lowered wages to attempt to contain costs… hyperinflation happened sooner than anybody expected..
    We (the US) are in a more tenuous situation.. as the worlds reserve currency is the US dollar.. This allows us to go farther along the monetarists path to destruction.. as the rest of the world is getting our Federal Reserve ‘Ben-Flation’ before we see here in the US…
    Remember… Human beings think linearly… In a decidedly NON-linear world.. meaning most people have the basic assumption that their future will be the same as their past… this ‘recession’ is just like all the other economic cycles they experienced.. The idea a major non-linearity.. like a hyperinflation and currency collapse is simply outside their life experience.. and therefore something that ‘can’t happen’…
    Remember several TV talking heads called Peter Schiff, Marc Faber, and Jim Rogers ‘nuts’ when they correctly called the real estate bubble.. ( At the same time Helo Bernanke predicted all was fine!)

    Anybody who has the time for a good read should get ‘GOLD- the once and future money’ by N. Lewis..

    BTW I agree with Scenario 3 also..

  7. I agree with all your points here, except Weimar was a singular event, not a controlled devaluation of all currencies, but just one currency. This is why i think that kind of inflation cant take place in all countries at the same time. Gold is great as a secondary currency and barometer, but gold based currencies , IMHO , cannot expand to meet the demands of a growing economy. No system works perfectly, but if i have to pay $40,000 dollars for a cup of coffee , eventually it wil all rebalance , even if it may not be in my lifetime. Thanks for a great and lively discussion, i really enjoy it……

  8. No Weimar was not a singular event. Brazil and Argentina experienced runaway inflation, and Zimbabwa had 100 trillion notes.
    The big difference here is that ours is a reserve currency. We have been able to print enough money as needed. Now the world is near the point where it will not accept dollars.
    You are right about one thing, almost all currencies are fiat currencies. This is a revulsion of all of that and a drive to own something of value, something to protect us from our government’s immorality.

  9. Right, but each of those events happened in one country for predictable reasons, not to the entire world economy. Eventually the bills have to be paid and the car will run out of gas.
    Its just that from my perspective as follows i see.:
    1)a)Housing bubble, they are not making any more land.
    b) Oil bubble, there is only so much oil.
    2) a) Demand for housing is rising and will contininue indefinetly.
    b) Demand for oil will continue to increase because of emerging economy demand.(never mind that the housing bubble in China and Australia have not yet collapsed as they are certain to)
    3) a)There is no oversupply of housing, demand will continue to eclipse supply.
    b) same argument with oil.
    I guess my point is, i remeber all these arguments about housing and we all see what happened with that. I avoided real estate all together as early as 2002 and being in the business , everbody thought i was nuts. I even wrote Peter about how obvious the bubble was then. I think the fact is we had the largest credit bubble in history, but it will rebalance and oppurtunity will find its median in all things.

  10. Jeff, there is no right or wrong answer to this. Your scenario is one of the six. You are in good company. I might remind you that there were many Jews in Germany prior to WWII that felt that the Jews were safe and there was no reason to get out of the country.

    I’m for “getting out ” out now!

  11. I am glad you have that option, the rest of us have spent everything we have to hang on to what we do have. My wife is an interior designer, and could not find a decent job in her field, so we are opening a Design studio in Old town Mt Vernon, We are going to sell Tom Seely , and CR Laine with custom fabrics and higher end flooring. All a gamble , but nothing left to lose. This is why i have faith in the entreprenarial attitude to eventually right the ship. If gold becomes our only store of real value, then all is lost…
    Best to you and yours….

  12. Great debate with Cogent articulate thoughts. Regarding housing, When roughly 23% of folks with mortgages are under water there is sure to be more trouble in housing. So the idea that housing will bring us back to prosperity is a myth. This mega bubble was fostered by the Federal reserve’s loose monetary policies for the last decade or more. I agree that the whole world is basically operating on a fiat currency system Since 1971. Those economies and countries that have defacto resources to back their currencies will prevail. Australia, Canada, etc. I think gold and silver are real money, and since .7% of money is invested in this sector, it will continue to do well. There is another great book to read, “when Money Dies” By Adam Fergusson. Many factors lead to the Weimar Hyper inflation that are being replayed now, so Put me in the Scenario three camp. If gold and silver aren’t your thing try whiskey, toilet paper and smokes cause we’re gonna need em.

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