Nicole Foss: Our consistent theme here at the Automatic Earth since its inception has been that we are facing a very powerful deflationary depression, following on from the bursting of an epic financial bubble. What we have witnessed in our three decades of expansion and inflation is nothing short of a monetary supernova, and that period has been the just culmination of a much larger upward trend going back many decades at least. We have lived through a credit hyper-expansion for the record books, with an unprecedented generation of excess claims to underlying real wealth. In doing so we have created the largest financial departure from reality in human history.
Bubbles are not new – humanity has experienced them periodically going all the way back to antiquity – but the novel aspect of this one, apart from its scale, is its occurrence at a point when we have reached or are reaching so many limits on a global scale. The retrenchment we are about to experience as this bubble bursts is also set to be unprecedented, given that the scale of a bust is predictably proportionate to the scale of the excesses during the boom that precedes it. We have built an incredibly complex economic system, but despite its robust appearance it is over-extended, brittle and fragile after decades of fuelling its continued expansion by feeding on its own substance.
The Automatic Earth, December 2011: The lessons of the past are sadly never learned. Each time the optimism is highly contagious. In the larger episodes, it crescendos into euphoria, leading societies into a period of collective madness where risk is embraced and caution is thrown to the wind. Sky-high valuations are readily rationalized – it’s different here, it’s different this time.