I used to be sold on the whole collapse of civilization scenario, but now I think it comes down to two variables that we can't predict - we can only watch what happens and plan accordingly.
1) Speed of collapse - fast means civilization goes under (not for long, but for long enough for a lot of death, lawlessness and despair), slow means that it's an orderly decline.
2) Responses by those in Power to affect #1.
Can you give me some sort of outline as to how the deflationary spiral will cause the system to go kablewey? That's what I'm having a hard time translating theory into reality.
Actually I don't know exactly what you're asking.
As the hypertiger thing said, you have to increase debt exponentially in order to maintain sufficient money in the system to service debt.
When debt is destroyed through default or repayment you're going backwards on the money supply.
The money supply is not just cash, it's cash and credit, credit spends the same as cash, when you buy a couch on payments cash hits the system and money is created.
When you turtle up and save money, money is destroyed, I know this is unfathomable but it's true, remember money is debt, debt is money.
The money in our system isn't just cash, most of it is credit, as credit tightens, money tightens.
The credit component of our system is huge compared to actual cash.
So even though they are printing money, they aren't printing enough to equal the loss of credit compared to where you would need to be on the exponential ponzi curve to maintain life as we know it economically.
More cash, less credit, = net net less money.
This just spirals down into the dirt as more people default, ie default is negative debt creation.
The inflation we've all gotten used to was powered by debt, as people shun debt and realize how awful it is they recoil and get out of it or avoid it, which is a sea change from how we have lived our lives.
One person doing this is nothing, but a society changing it's habits will create a chain reaction in a system dependent on exponential growth.
The crux of the confusion on this comes because people don't understand how money is cash and credit and how much of the equation is credit in terms of our total money outstanding.
You could remove all the cash in the world tomorrow and it wouldn't make much of a dent in things.
If you removed all the credit, the world would evaporate monetarily.
As credit tightens money tightens, which reduces the value of things but lending.... ie credit, is based on the value of things.
So since I'm in lending i see this intuitively, as credit tightens the very asset, a house, loses value, which makes lenders tighten more, which makes the value drop more, which makes me tighten up my guidelines more.......
Now food isn't bought on credit but cash, same as gas/oil and those things hold their values in such a case and a lot of times relative to the asset portion of the equation make it appear that there is inflation, this is FALSE, a house is a much larger portion of your overall balance sheet than your food is, so the cost of food going up relatively only makes the house fall in value more, destroying more credit creation.
It's a positive feedback loop.
Everyone is caught in this loop because as a whole most of us have far more debt than cash.
When you have more cash than debt you can escape this, when you have more debt than cash you are done.
The government has more debt than cash and is backing everything and it's income is tied to a price level that is imploding.
The governments real cash is it's ability to raise revenues, in the first great depression our government had excess ability to raise cash, ie it had in effect more cash than debt, even though it had debt.
At this point this time our government has no ability to raise revenues without squashing the economic world in the process, ie it's got in effect more debt than cash this time around.
