Great depression history revisited

honestly, who lets an artist with a perverse fascination for his sister start a right wing political party...?

BC, I assume you talk about Hitler.

It is important to understand this point:

Leaders are not pulled up by mystical force from above them.
Leaders are lifted by people from below them.

Hitler was a creation of diverging forces of conflicting circumstances and desires. He was there at the right place and the right time. :)
 
Leaders are not pulled up by mystical force from above them.
Leaders are lifted by people from below them.

true

unless you're george dubya :D

I believe we have more problems to come in the developed world. Japan and UK may go down the history and never stand up again.

i would be worried if Japan went under - they might revert to socialism - throw their hands up and say "thats it! we've tried this capitalist crap for over 150 years and clearly we can't grasp it".
 
Interesting article from cnbc:
Why This Recession Seems Worse Than '70s and '80s
Topics:Economy (U.S.) | Alternative Energy | Environment | Weather | Mortgages | Credit | Subprime Lending | Housing | Real Estate
Sectors:Utilities | Construction and MaterialsBy: Albert Bozzo, Senior Features Editor | 13 Feb 2009 | 10:59 AM ET Text Size If you think this recession is the worst since World War II, chances are you weren't born or working during the downturns of the 1970s and '80s, you're listening to President Obama too much or you're a white-collar worker in financial services.

If all three are true, you may even think we’re on the verge of another Great Depression.

At this point, the only thing that may be true is your age and employment status.



“The current situation has nothing in common with the Great Depression,” says economist Steve Hanke of the Cato Institute and Johns Hopkins University. “The sooner they [in Washington] stop spinning the bad news story and say nothing, the sooner we’ll be more confident.”

Hanke is not alone in dismissing what appears to be a potent cocktail of misinformation and doom and gloom, wherein the current recession—now in its 13th month—is already considered worse than the 16-month ones of 1973-1975 and 1980-1982.

“We were pretty scared in ’82; things looked horrible for awhile," says Bob Stovall of Wood Asset management and a 55-year veteran of the securities business. “I don’t think you can say it’s worse than then; its different. You have changed the landscape but you did that in the Midwest when you forced a lot of rust-belt companies to the wall."

“This time it's financial firms going out of business, instead of manufacturing ones, and the jobs are going with them," explains Stovall.


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“I do think that's part of it,” says Robert Brusca, chief economist at Fact & Opinion Economics, saying that. “They’re the ones making the pronouncements. People in the financial sector are getting crushed.”

They’re not the only ones selling doom and gloom, though.

“I don’t remember a president talking down the economy as much as President Obama,” says economist Chris Rupkey of Bank of Tokyo-Mitsubishi. “The economy is very psychological. There’s a herd instinct.”

That herd instinct kicked into overdrive after the sudden collapse of Lehman Brothers, when many say the economy fell off a cliff and a classical cyclical downturn merged with a nasty one-of-kind credit crunch. So yes, economists agree things are bad, but they need to be put into perspective.

Employment

At this point, the current recession is worse than those of the '70s and '80s by only one statistical yardstick, and that’s the unusually quick ascent in the jobless rate—from 4.4 percent in March 2007 to 7.6 percent in January 2008.

“People are reacting so adversely to this is because the job market has become so weak,” explains Brusca.

But even though the sharp decline in payrolls over the past three months has been stunning, it is not as bad on a percentage basis as one period in 1974-1975, according to David Resler, chief economist at Nomura International. Resler says the economy would have to lose some 767,000 jobs a month over a three-month period from the current employment level to match that miserable performance.

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During the 1973-1975 and 1980-1982 periods the unemployment rate almost doubled (4.6-9.0 percent, 5.6-10.8 percent, respectively), which means a peak of about 8.6-8.8 percent this time around. In further contrast, during a ten-month stretch in 1983-1983, the jobless rate was above 10-percent.

Nevertheless, that’s nothing compared to the Great Depression when the unemployment rate went from 3 percent to almost 25 percent in four years and national income was halved, notes Hanke in a recent column.

Growth

Thought it may be little consolation for the millions of unemployed, GDP is considered by economists to be the best and broadest gauge of a recession.

That may seem also peculiar since the economy actually grew in the first two quarters of this recession, but some of that had to do with the Federal Reserve's early and aggressive interest rate cutting and the federal government’s first stimulus plan which quickly put money into people’s pockets.


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Given that backdrop, GDP contraction thus far has been modest. It’s down 1.1 percent vs. 3.1 percent in the 1970s period, says Chris Rupkey.

And though the economy shrunk at a 3.8 percent annualized rate in the fourth quarter of 2008 and is expected to decline another 4.0-6.0 percent in the first quarter of 2009, imagine the reaction today to the 7.8 percent plunge in the second quarter of 1980 or consecutive swoons of 4.9 percent and 6.4 percent in 1981-1982.

"Half of the workforce until now hadn't seen more than 16 months of recession—total," quips Resler. The past two short (eight months) and relatively shallow.

During the 1990-1991 recession, the deepest quarterly GDP decline was 3.0 percent; in the 2000-2001 one it was 1.4 percent.

“GDP hasn’t been that weak because the productivity increase is one of the best,” says Brusca. “You get a quarter or two that really knocks the level down,” he adds, and it looks like we’re at that stage now.

This time other fundamental factors are playing a bigger role than the past.

“Consumer spending will be bad,” says Resler. “We haven’t three consecutive quarterly declines in consumer spending since the 1950s.” He’s definitely expecting a repeat of that.

It’s Still Bad

Comparisons aside, no one is saying the current recession isn’t a painful one, and some see very little reason for optimism.



“I can't identify anything than looks good,” says Dean Baker, co-director of the Center for Economic Policy And Research, adding that business investment—which appeared to be holding up—posted its sharpest decline in 50 years in the final quarter of 2008.

“I'd be shocked if we have growth this year,” says Baker, even though he expects the Obama administration’s stimulus plan to have a sizable economic positive impact.

So may the words of the President and his advisors, say economists.

“It’s not surprising that politicians exaggerate this,” says Resler, who predicts “The tone of the message is going to start changing immediately; now that we have the stimulus in hand, you enhance it by saying positive things.”

Tunnel Thinking

For all the comparisons with other recessions, exaggerated or not, the most meaningful one may be its duration. It is also the toughest.

Economy: Full Coverage
The consensus is this recession will end sometime between the second half of 2009 and the beginning of 2010. The pessimists say wait till next year—period.

David Jones, CEO of DMJ Advisors, is among those who see “hints of stability.” By that he means, the rate of decline in areas like retail appear to be slowing.

“We'll see the same thing happening on the housing side in the next couple months,” says Jones.

“I'm just waiting for the shift in people’s expectations,” adds Rupkey.

© 2009 CNBC.com
 
“This time it's financial firms going out of business, instead of manufacturing ones, and the jobs are going with them," explains Stovall.


I got as far as this sentence, so that will do me. What a load of crap. It's not just financial firms going bust. It's everything.

All you bulls trying to talk things up just simply don't understand whats going on.

See ya's.
 
Looks like the DOW is starting a new downward trend.

http://au.finance.yahoo.com/q/bc?s=^DJI&t=1y&l=on&z=m&q=l&c=

This chart does not include overnight nearly 4% fall! It stops at just below 8000 but should show just over 7500.

I have thought nonrecourse's posts are a bit extreme (and i'm a card carrying bear) but now i might be willing to revise that opinion. Its not looking good.
 
my issue is banks pulling pins on quality businesses with a tiny bit of debt or over-exposure, revaluing their assets, taking 50% off and saying "sorry, you owe us equity - we're foreclosing" and driving quality companies to the wall.

this is happening to a lot of Gold Coast & Perth developers now - banks can't see past the end of their noses - where they not only hurt everyone out there, but themselves as well.

crystallising losses does nothing but erode intrinsic value and the intrinsic value of everything associated with that loss.

This chart does not include overnight nearly 4% fall! It stops at just below 8000 but should show just over 7500.

last night's loss smashed through the 7800 barrier. margin call time for those that went long with leverage and chance for the big boys to buy in for the bounce at a lower price. sell it down, stop em out, buy low, sell the whipsaw.

perma-bull i aint, but opportunity i see.
 
my issue is banks pulling pins on quality businesses with a tiny bit of debt or over-exposure, revaluing their assets, taking 50% off and saying "sorry, you owe us equity - we're foreclosing" and driving quality companies to the wall.
Of course pendulum is swinging in the opposite direction. For those businesses without concrete assets (ie tangible non-machinery assets) there is very little intrinsic value if the business is liquidated

this is happening to a lot of Gold Coast & Perth developers now - banks can't see past the end of their noses - where they not only hurt everyone out there, but themselves as well.

crystallising losses does nothing but erode intrinsic value and the intrinsic value of everything associated with that loss.



last night's loss smashed through the 7800 barrier. margin call time for those that went long with leverage and chance for the big boys to buy in for the bounce at a lower price. sell it down, stop em out, buy low, sell the whipsaw.

perma-bull i aint, but opportunity i see.

Read Westpacs comments today:
asset quality in the bank's corporate and commercial portfolio continued to deteriorate in line with the weakening of economic activity.

Look what happened to Suncorp that was not aggresive enough on its risk policies over commercial and property lending.

Look at the listed share prices of REITS, even the bellweather: Westfields is now over 50% down.

With capitilisation rates on the rise, and property writedowns occurring, the banks dont want exposure to assets listed at 'book values' or directors valuations unless they have adequate equity insurance.
 
Looks like the DOW is starting a new downward trend.

http://au.finance.yahoo.com/q/bc?s=^DJI&t=1y&l=on&z=m&q=l&c=

This chart does not include overnight nearly 4% fall! It stops at just below 8000 but should show just over 7500.

I have thought nonrecourse's posts are a bit extreme (and i'm a card carrying bear) but now i might be willing to revise that opinion. Its not looking good.

I have heard the Chinese and Brazilian indexes are booming?
 
my issue is banks pulling pins on quality businesses with a tiny bit of debt or over-exposure, revaluing their assets, taking 50% off and saying "sorry, you owe us equity - we're foreclosing" and driving quality companies to the wall.

this is happening to a lot of Gold Coast & Perth developers now - banks can't see past the end of their noses - where they not only hurt everyone out there, but themselves as well.
So true, the suites at the banks have no grasp of reality, the Gov bailed them out and they will happily decapitate there customers, A lot of the small to medium business's are doing OK, things are tough but with a bit of support they will be OK.

$%^&** banks !!!

Need to see more job losses in banks. :D

Regards
Graeme
 
What I find most interesting is the idea that the situation in the US is not anything like in Japan in the 90's, when their own central bankers are saying publicly that this is what they are extremely worried about happening in the US !!!

Overnight, the president of the St Louis Federal Reserve Bank, James Bullard, said in a speech that there is now the risk of a “deflationary trap” in the US.

He said: “In some ways, our current environment parallels the Japanese experience after 1990. The Japanese banking system encountered difficulties with 'troubled assets' and the intermediation system broke down. Eventually, persistent year-on-year deflation was observed in core measures of inflation, and average economic growth stagnated.

“Ongoing deflation in the United States might be particularly pernicious. Household mortgages are long-term nominal contracts. Sustained deflation increases the real debt burden of leveraged homeowners and can erode their equity. With sustained deflation, the foreclosure experience that we have seen in the subprime market could generalise to a wider spectrum of homeownership. This is a significant downside risk to macro-economic performance.”
 
http://www.businessspectator.com.au/bs.nsf/Article/Dodging-the-deflationary-trap-$pd20090218-PCRDG?OpenDocument

The economies of Japan, Latvia, Iceland, Ireland and possibly Spain are in free fall – what might be called a technical depression (10 per cent contraction of GDP). The UK appears headed for that too.

Continental Europe is about to face its own subprime crisis because of the massive and imprudent lending by its banks to Eastern Europe, mostly in euros and Swiss francs. The currencies of most of the eastern European countries have collapsed, massively increasing the value of their debt.
 
just part of the shift of wealth from west to east, we al knew it was coming.

now we just need oil to price at a realistic level and the world will be back on track
 
Looks like the DOW is starting a new downward trend.

http://au.finance.yahoo.com/q/bc?s=^DJI&t=1y&l=on&z=m&q=l&c=

This chart does not include overnight nearly 4% fall! It stops at just below 8000 but should show just over 7500.

I have thought nonrecourse's posts are a bit extreme (and i'm a card carrying bear) but now i might be willing to revise that opinion. Its not looking good.

Looks like a text book Elliott wave correction for the DOW and other Indices, this being wave 5.
I posted a chart below and filled in the blanks to give a idea of what might happen.
 

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It is quite interesting that whatever brought an end to the great depression is not well understood

http://www.independent.org/pdf/tir/tir_12_02_02_steindl.pdf

An interesting article on what leverage is more broadly

The economic collapse of Japan and the Phoenix Suns
Tyler Cowen
Most of you have heard about the Japanese gdp report; it implies an annualized rate of decline of almost 13 percent. OK, they depend on exports but why is it so dire there?

You also may have heard that the Phoenix Suns have been trying to unload All-Star players Amare Stoudemire and Shaquille O'Neal. They are not hoping to get equal talent in return but rather they need to lower their payroll. (Why pay $75 million a year for a fringe playoff club?) And the New Orleans Hornets, former contenders, traded center Tyson Chandler simply to unload his salary.

I think of the Suns or Hornets as similar to a highly leveraged institution. I don't know the debt level of their corporate structure but that is not the point. The Suns have been spending lots in recent years toward the goal of ever-rising prices for season tickets and corporate boxes. Does that strategy sound familiar? If the future price hikes don't come on the main asset, they can't afford their obligations and so they will try to shed illiquid and hard-to-value assets into an unwilling market. Sound familiar? (As an aside, I wonder if barter is one way to jump start trading in illiquid financial assets.)

Does this sound familiar?:

"You've got a market loaded with motivated sellers and only a very small group of buyers," one NBA executive told ESPN.com. "It's really ugly. Owners are scared to death right now."

Institutions can have receipts and obligations which require growing revenues even if they don't have much explicit debt on their books. I think also of the artistic non-profits which invested in expensive facilities, in the hope of ever-rising donations from their investment banker patrons. Many other parts of the economy may be "leveraged" in this fashion, with or without high levels of debt.

Japan, of course, has high levels of government debt and also a demographic problem. I wonder whether their future-oriented export strategies make them even more leveraged, de facto, in a manner resembling the (former) business strategy of the Phoenix Suns.

One lesson of this crisis will be how deep the concept of leverage extends. That's another reason why this is fundamentally a crisis of sectoral shifts.
 
Interestingly some of the bears have lost as much as the bulls in this market :

http://stumblingandmumbling.typepad.com/st...nstability.html

Anglo-American Outperformance

The Anglo-American economies are outperforming in the current global economic downturn, as Chris Dillow observes:

The “Anglo Saxon” model - lightly-regulated financial markets and high debt - makes their economies unusually vulnerable to boom and bust…

This has become conventional wisdom. Today’s figures, though, seem to contradict it. They show that euro zone fell 1.5% in Q4 (6% annualized!), as much as it did in the UK and more than in the US. With next week’s figures likely to show a huge fall in Japanese GDP, this means that the major “non-Anglo” economies are doing at least as bad as the US and UK.

As Chris notes, this is partly due to the exposure of the non-Anglo-American economies to highly cyclical manufacturing industries. However, the importance of manufacturing to these economies is itself a function of the mistaken strategic industry and trade policies pursued by these countries.

The cyclical outperformance of the Anglo-American economies reflects their structural outperformance, which affords them higher trend growth rates around which their economies cycle. Japan’s trend growth rate of around 1.5%-2% is so low that it takes only a modest downturn to throw its economy into recession, which is why Japan experiences so many of them.

Fiscal stimulus packages and other interventionist policy responses in the Anglo-American economies will undoubtedly hurt their structural performance. However, these polices are no worse than those being pursued elsewhere, so the Anglo-American economies and asset markets still have scope to outperform in the context of the current downturn.

It should not be surprising then that those who followed the asset allocation advice of some of the leading permabears are now seeing their portfolios underperform.
 
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