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Laz, the author has got it wrong. The economy is correcting a fundamental problem: global oversupply.

The planet makes too many cars...excess manufacturing capacity.

There are 19 million vacant homes in the U.S. alone...surplus housing capacity.

There are too many shopping malls. Overcapacity.

There are too many cargo ships. There is too much office space (14% vacancy rates in the U.S. alone).

For centuries B-schools have been insisting that the path to prosperity was to “make things,” but not once did schools or the news media mention what would happen if we had too many factories, too many offices, too many homes...global overcapacity.

And finally, the world made too much. The camel’s back was broken.

Think about it. 19 million vacant homes. Do you want to go build a house “on spec” for an investment right now?

That would be pretty suicidal.

Do you want to build a new automobile factory? No. Again, that would be financial folly.

Well, that’s the state of the entire planet right now.

And the Market responds to that excess capacity with deflation.

Prices fall.

Shipping prices, for example. Phenomenal numbers of giant new ships have been built. Last year the shipping rate for oil on a supertanker from Saudi Arabia to Japan cost $177,000 per day. Today, the shipping rate is $16,000.

Enormous deflation.

At the high end, the Ferrari Premium is gone. There’s no more waiting list to buy a prancing horse, and no more “above sticker” pricing.

At the low end, the Smart Car is being discounted 27%.

Deflation.

Insurance rates are down. Deflation.

Computer prices are down. Deflation.

Cell phones are cheaper, and cell phone service is less. Deflation.

Oil has fallen from $147 / barrel last year down to the $50’s today. Deflation.

Massive credit contraction. Massive debt destruction. Massive wealth losses. Massive asset price drops.

Boats are cheaper. Planes are cheaper. Motorcycles are cheaper. 4Wheelers are cheaper. Homes are cheaper. Stocks are cheaper. Salaries are down. Wages are down. Hours are down. Overtime is down. Bonuses are down.

Deflation.

And we will have deflation until the excess capacity is removed from the economy.

Doesn’t matter if governments fight the above; it’s inevitable. It can be delayed, not stopped.

And that’s not going to bring down our government. Mugabe is still in power in Zimbabwe. Governments don’t fall easily.

And cultures survive long after governments fall. Japan’s government lost WW2 and still maintains its distinct culture.

The loss of easy credit and the loss of easy money real-estate and stock/bond schemes will happen, of course, but they will happen as part of the Market’s response to global overcapacity...not due to cultures or governments falling.

And yes, the public will return to the basics instead of returning to escalating the keepupwiththeJones’s wars.