(This is Part 11 in a series. Go back to Part 10.)
On the other hand, inventory in the auto industry is at an 80-day supply, 1.3 million GM vehicles sit unsold on car lots, and vehicle sales are maintained only by the highest incentives in history. Why is it so hard to sell a vehicle? Is the debt-strapped public getting tired?
Add to that the fact that credit-card defaults and personal bankruptcies are rising rapidly, while fundamental over-capacity is being created in certain industries, particularly in China, and one could be forgiven for receiving the impression that deflationary forces are also at work.
Contributing to this picture is the vast bond market. The huge "carry trade," in which financial entities borrow at low short-term rates to buy bonds, is leveraged on average at 20 to 1—meaning that further liquidation of bonds to unwind positions could become a selling panic.
There is a titanic struggle going on behind the scenes at the moment between deflationary and inflationary forces. The Great Global Credit Bubble is trying to unwind, while frantic credit creation is trying to expand it further. This huge struggle is mostly taking place out of public view, but it is no less real for that.
The Great Global Credit Bubble has long ago reached the point of no return—it must be kept expanding or it will collapse. Hence the extraordinary increases in the money supply. Hence interest rates kept at or near historically low levels. But the longer this corrective reckoning is put off, the greater the collapse will be.
Something's gotta give, and I suspect it may not be all that much longer. Either the global economy will sail up into hyperinflation or it will implode into depression. And we could get one followed by the other. It's even possible that we could get both at the same time, a much more intense version of the stagflation of the 1970s.
I know of no investment that I would consider absolutely fruitful in this environment, but gold and silver seem the closest as they can often do well in either inflationary or depressive environments.
It's also true that both inflations and depressions, each in their own way, create a "shortage of cash," so putting together as much cash as you can, getting some gold and silver with some of it and listening carefully to hear which way the wind blows seems like a reasonable idea.
Why bring up such a seemingly depressing subject? It is a loving universe. Nevertheless, we must deal with reality. As the saying goes, "Those who don't deal with reality get dealt with by reality." Yet it's a good thing that we must deal with reality.
It's easy to be spiritual on the mountaintop. It's when we learn to bring our compassion and consciousness to the marketplace—to the great challenges of everyday reality —that our spirituality can become something deep, strong and reliable. All things work for good. All things.
As the great mystic Judith of Norwich said, "All is well, and all is well, and all manner of thing shall be well."
—jim sloman, 6.3.04 for June 9
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