Why are photovoltaic solar companies experiencing a Greater Depression?

Despite the fact that it is only a small part of the future solution for global energy, I believe that the long term future for photovoltaic solar technology is bright.  It has several things going for it:

• Peak oil is real although will take longer to be fully felt because the US has been sandbagging its reserves. 
• Oil extraction keeps getting more expensive.  Solar energy keeps getting cheaper as panel efficiency continues to climb.
• Solar PV energy can be captured onsite instead of having to rely on government and government backed energy companies to keep up on maintenance of central power generation and distribution at a time of falling revenues.  When the rolling blackouts become the norm, expect people to step up and pay up for local generation.
• Installed PV solar farms need little maintenance, have no moving parts and they make no sound.  They can be put on the roofs of any structure whose primary purpose was to simply block the sun (carports, etc.)

So if all this is true, why have most solar plays crashed, many of them sitting at levels which are greater percentage losses from the top than the DJIA saw during the Great Depression?  I think there are several reasons for this:

1. The price per watt for PV solar is still too high.  Oil prices have gone up in the past 10 years but the real cost of it has been masked by the use of debt to buy it.  At some point debt will no longer be accepted as a means of payment and then we will know what the true cost of oil is.
2. Despite many people thinking that immediate inflation or hyperinflation is right around the corner, the unfolding collapse in credit is telling a different story.  The money supply is made up of the monetary base plus the outstanding credit (AKA debt) with credit being at least an order of magnitude larger component of the money supply than is the monetary base.  Thus, as credit evaporates from the economy, the overall money supply shrinks and that is deflationary. The Federal Reserve and all of the government have been combating deflation, not inflation.  Bernanke has been inflating the monetary base as much as he dare without setting off a panic but still wages and jobs are, in aggregate, flat or falling while an increasing number of cities are going bankrupt (see predictions from Meredith Whitney).  All you have to do is look at the plummeting price of copper to know that the inflationists are re-thinking their positions.  China has stockpiled commodities like there was no tomorrow and soon we will see the great Chinese real estate bubble collapse.  This will cause commodity prices to roll over big time.
3. PV solars, being new, are the canaries in the deflation coal mine.  They are front runners.  They got hit first and they will bottom first. When the commodity crash has played out and the inflation finally does kick in (and it eventually will), the surviving (key word is surviving) PV solars will be among the greatest beneficiaries. 
4. PV solars were artificially kicked into high gear by government.  Unfortunately, governments pay for things with debt.  As the debt game began to unravel globally, solars stopped getting subsidized.  Thus, their crash is worse than if government never got involved at all.  Government intervention made things great for gamblers and market timers but horrible for normal investors and the whole industry is now worse off than if government had just let the free markets run the show.  Government involvement distorts markets and crushes the free market feedback loop that is so necessary for stability.  Central planning is always and everywhere misguided and in many cases is nothing more than a scam.  Government scammers back industries with taxpayer money and loan guarantees and then invest in these things personally, generally through hedge funds which are told about the government backing in advance (AKA illegal insider trading).  With weight of government behind the investment, personal profits fly for the con men.  Of course, in times like we have right now, the investments can also blow up in the faces of the con men.

 
The coming deflation is likely going to be the story of the decade IMO.  Bernanke’s helicopter looks to be out of gas.  He now has to choose between letting the natural credit deflation play out or putting the Federal Reserve – which is a private bank contrary to what many believe – into real jeopardy.  He cannot have it both ways.  As Harry Dent said, the Fed is checkmated and it has to choose badness in one form or another (massive deflation and bankruptcy vs. massive inflation or even hyperinflation).  I believe that the fed will try to save itself by allowing deflation to occur.  It will likely get bad for people (unemployment, civil unrest, etc.) such that Congress finally shuts the Federal Reserve down (in some form or fashion to include the simple installation of puppets) and then goes on a money printing spree which eventually destroys the dollar.  We are talking years and years here not months and quarters.  This is, of course, assuming that nobody honest like Ron Paul wins the 2012 US Presidential election and that we are instead left to the devices of new con men like Romney, etc.

Given that I like Elliott Waves, I will call your attention to the fact that Elliott Wave International is having “free week” for people interested in commodities.  All you have to do is create a free account at elliottwave.com.  I want to call your attention to this chart from their Sept version of their Futures Junctures newsletter (normally a subscription resource but provided free to anyone during free week…). 

What’s interesting about this chart is that they are calling a top in the CCI (Continuous Commodities Index) based on the wave count (and other technical indicators).  They are doing this at a time when it’s becoming clear that China’s housing bust is likely getting very close.  Anyone who thought that China’s consumption would save the world is going to be very disappointed when they find out that China is nothing more than a debt Ponzi just like everyone else.  It could easily lead to a huge contraction in commodities, including silver and gold (I suggested that gold was due for a pullback in this post).  Perhaps the most important thing to look for should this predicted contraction occur would be if gold failed to contract with everything else (or contracted at a slower rate such that the ratio of gold to commodities was still climbing).  It would be good proof that the silent remonification of gold which I believe is happening is in fact happening.