THE FINANCIAL WARNING YOU WERE NEVER SUPPOSED TO HEAR 13
first since the 1930s. This New Depression will continue indefi-
nitely unless policy changes are made in the years ahead.
The present path and future course of this depression have
profound implications for you as an investor. If you don’t grasp
this once-in-a-lifetime dynamic you are at risk of seeing all of
your wealth wiped out.
Calling the current economic malaise a depression comes
as surprise to most investors I speak to. They have been told
that the economy is in a recovery that started 2009.
Mainstream economists and TV talking heads never refer
to a depression.
Economists don’t like the word depression because it does
not have an exact mathematical definition. For economists,
anything that cannot be quantified does not exist. This view is
one of the many failings of modern economics.
But no one under the age of 90 has ever experienced a de-
pression until now. Most investors like you have no working
knowledge of what a depression is or how it affects asset values.
And economists and policymakers are engaged in a conspiracy
of silence on the subject. It’s no wonder investors are confused.
The starting place for understanding depression is to get the
definition right. You may think of depression as a continuous de-
cline in GDP. The standard definition of a recession is two or more
consecutive quarters of declining GDP and rising unemployment.
Since a depression is understood to be something worse then a
recession, investors think it must mean an extra-long period of
decline. But that is not the definition of depression.
The best definition ever offered came from John Maynard
Keynes in his 1936 classic, The General Theory of Employment,
Interest and Money. Keynes said a depression is, “a chronic
condition of sub-normal activity for a considerable period
without any marked tendency towards recovery or towards
complete collapse.”
Keynes did not refer to declining GDP; he talked about