Many people, and particularly many ostensible economists, presume to our peril that the First Great Depression was caused by the stock market crash.
The peril of this presumption is that in thinking a consequence is the cause, we fail to perceive the real cause, or its solution.
The stock market crashed in 1929 because of the same multiplying indebtedness per real value and potential capacity to service debt which spans the breadth of the pretended economy now.
Although the Great Depression precipitated from healthier statistics than plague us now, rather than saving, people were “investing” their spare money in so called securities on short term credit. The purported success of the market coerced the people to do so, because the temporary returns on “investment” far exceeded the returns for saving, and because devaluation of the dollar under multiplying indebtedness further reduced the relative value of savings.
But as is the present case, the dollar was not devalued by inflation. Rather, it was devalued by price inflation, resulting from multiplication of debt by interest and dedication of ever more of the circulation to servicing debt, versus sustaining the commerce which is obliged to service the debt. The underlying nature of the “money” therefore was the root cause of both erosion of the value of money, and the mounting probability that the subject commerce would fail under the unsustainable obligation to service a sum of debt which multiplies perpetually, as we necessarily replenish a circulation by re-borrowing interest and principal as ever greater sums of debt.
People therefore wagered their spare earnings in speculation. Having a small margin of typically say, 10 percent, they could borrow the remaining 90 percent to purchase “securities” on debts such as represented by 7, 10, 15-day promissory notes. At the conclusion of the short-term debt, they would sell the “securities,” and re-coup substantial unearned profit at the expense of the producers of wealth, as for instance if the artificially inflated value of the securities rose 10 percent, this would double the money they had invested.
We don’t have to be mathematic geniuses to see that in not long, this artificial inflation of the value of stocks/”securities” would create to the unwitting a deception that a magnitude of prosperity existed, while the prosperity itself was a small fraction of the debt the subject people had so multiplied upon themselves.
Seeing this disparity, or perhaps acting for the sake of their superior position to take, one day the private banks which comprise the so called Federal Reserve withdrew the further “credit” (perpetually self-multiplying debt) necessary to sustain the waiting “accident.” Oh, sure, in partnership with the so called Federal Reserve, the people had over-extended their credit-worthiness.
So suddenly having to market their “securities” to a market having only the margin in circulation… of course the market immediately crashed.
But why did it take down the rest of the purported economy with it? That’s the question.
The market crash took the rest of the purported economy down with it, because the whole system was so subject to debt. The collapse of this one sector, pushed the sector passed the brink of solubility; and so it was a collapse under excessive credit which brought the rest of the system down.
What are we to learn then from these combined conditions of falsely inflated values, sustained by perpetual excessive “credit”?
It is no more the sector which collapsed which signifies the probability of overall failure than it is a certain wave which crashed on the beach which caused the sun to set. No more can we find that wave to be the cause of sunsets the following day, than we can expect the pretended economy to fail but for any other reason than the nature of the currency, which inherently multiplies debt in proportion to the circulation.
Because a currency subject to interest multiplies debt in proportion to our potential to service debt, ultimately every such system fails under a mountain of insoluble debt it eventually can no longer service. And so, when any sector breaks, it may take all further sectors of a highly jeopardized system with it.
The peril of failing to understand the root cause is, that we may never be compelled to do anything about the nature of the currency.
We know for instance that the so called Federal Reserve has, for several decades, artificially buoyed stock prices — often even buying “government securities” with money these private banks publish at virtually no cost or risk whatever. Seeing this seems to sustain “markets,” we are lulled into a very false sense of security by this narrow range of “evidence,” for as we can readily see, behind the backs of those whose barometer is the “markets,” private and public debt both have multiplied to incredibly unsustainable magnitudes, to the detriment of the generations now and in the future, which are to pay the consequences.
If you were the first players to take turns at the Monopoly Board after the First Great Depression, you might think how wonderful all the unearned profit which can be taken by the first generation player, while the rest of us pay 50 prices just for rent, and while you might leave us too with all the public and private debt which has been accumulated to perpetuate the false, temporary proposition that the people benefit equally, generation after generation under usury.
Before or after the Second Great Depression then, we can finally come to understand that dispossession is the very purpose of the imposed, pretended economy; and that while “interest” inherently multiplies debt into terminal sums of debt, the reason the unassented systems are retained upon us is their original purpose — which is to take from us without justification, by perpetual multiplication of debt.
This Depression may or may not look like the last one to you. And you may think we have time because the so called markets are falsely sustained by infusions of cash. But the real issue is multiplying indebtedness.