http://business.theage.com.au/business/very-depressing-yes--great-depression-no-20081108-5kj0.html
James Kirby
November 9, 2008
IF SOMEONE tells me once more that "we're facing a situation like the Great Depression", I'll scream.
You can't blame the headline writers for getting excited - after all, we haven't had a good old-fashioned stockmarket crash for a very long time. But let's get one thing clear. This is not 1929 when they had to close the crammed gallery of the New York Stock Exchange with people screaming and crying as if they were watching a ship sink.
In fact, if it was 1929 all over again investors would be buying shares with their ears pinned back, because if you look at what actually happened, the stockmarket roared back in the following months after the October crash. Wall Street had regained almost half its losses by June 1930. It was the mid-1930s before things got really rotten - and stayed so with 20%-plus unemployment right through to 1938.
Under normal circumstances we don't have to pay such close attention to US markets - but these are not normal days. For the moment the Australian market is completely dependent on Wall Street for direction… and it's going to stay that way until we see a sustained market recovery.
Every day the disaster alerts roll forth. The International Monetary Fund is the latest unwitting provider of gloom. It was reported on Friday that the venerable - if often irrelevant - world authority suggests the world's developed economies are facing the first full year of economic contraction since the Second World War.
Now that does sound serious and it got plenty of attention. If, again, you actually read the IMF report, it says our current circumstance is not unique. In fact, the report says it is "broadly comparable" to 1975 (oil crisis) and 1982 (high inflation and high unemployment).
The IMF report also says we are on track for a global recovery to begin this time next year; of course, that barely got mentioned anywhere.
I've spent the week reading about market crashes and it's clear the horrors of the 1920s and 1930s - the era of the Great Depression - are so long ago and occurred in such a different political and investment environment they don't help us gauge anything about what might happen now.
The substantial Wall Street crash of the mid-1970s is much more relevant. It was a crash driven primarily by an economic event - the rising price of oil - and occurred when people had television news and, crucially, a developed market with much of the structures we have today. With high inflation, and the Watergate crisis thrown in, Wall Street fell from 1051.70 in January 1973 to 577 in December 1974. This is directly comparable to today - the Dow has dropped from 14,000 this time last year to below 9000.
So what happened to end the 1970s market downturn? They got a new president (Gerald Ford) and slowly but steadily things stabilised. Inflation, the curse of the era, dropped, economic growth picked up and the market found something new to be excited about - computers and pharmaceuticals.
It's disheartening to see the markets fall sharply in the immediate aftermath of Barack Obama getting elected midweek - but the road is long. Markets always recover. They always find something to recover with … it's not just incrementally better GDP … something always comes along … just you wait and see.
Seth Glickenhaus is 94. He's been working on Wall Street since he started as a messenger boy in 1929 and he still goes to work every day. After the Obama election he said: "People don't realise it: bear markets occur in a great hurry. It used to take a year or two, but this time it's taken a matter of months."
James Kirby
November 9, 2008
IF SOMEONE tells me once more that "we're facing a situation like the Great Depression", I'll scream.
You can't blame the headline writers for getting excited - after all, we haven't had a good old-fashioned stockmarket crash for a very long time. But let's get one thing clear. This is not 1929 when they had to close the crammed gallery of the New York Stock Exchange with people screaming and crying as if they were watching a ship sink.
In fact, if it was 1929 all over again investors would be buying shares with their ears pinned back, because if you look at what actually happened, the stockmarket roared back in the following months after the October crash. Wall Street had regained almost half its losses by June 1930. It was the mid-1930s before things got really rotten - and stayed so with 20%-plus unemployment right through to 1938.
Under normal circumstances we don't have to pay such close attention to US markets - but these are not normal days. For the moment the Australian market is completely dependent on Wall Street for direction… and it's going to stay that way until we see a sustained market recovery.
Every day the disaster alerts roll forth. The International Monetary Fund is the latest unwitting provider of gloom. It was reported on Friday that the venerable - if often irrelevant - world authority suggests the world's developed economies are facing the first full year of economic contraction since the Second World War.
Now that does sound serious and it got plenty of attention. If, again, you actually read the IMF report, it says our current circumstance is not unique. In fact, the report says it is "broadly comparable" to 1975 (oil crisis) and 1982 (high inflation and high unemployment).
The IMF report also says we are on track for a global recovery to begin this time next year; of course, that barely got mentioned anywhere.
I've spent the week reading about market crashes and it's clear the horrors of the 1920s and 1930s - the era of the Great Depression - are so long ago and occurred in such a different political and investment environment they don't help us gauge anything about what might happen now.
The substantial Wall Street crash of the mid-1970s is much more relevant. It was a crash driven primarily by an economic event - the rising price of oil - and occurred when people had television news and, crucially, a developed market with much of the structures we have today. With high inflation, and the Watergate crisis thrown in, Wall Street fell from 1051.70 in January 1973 to 577 in December 1974. This is directly comparable to today - the Dow has dropped from 14,000 this time last year to below 9000.
So what happened to end the 1970s market downturn? They got a new president (Gerald Ford) and slowly but steadily things stabilised. Inflation, the curse of the era, dropped, economic growth picked up and the market found something new to be excited about - computers and pharmaceuticals.
It's disheartening to see the markets fall sharply in the immediate aftermath of Barack Obama getting elected midweek - but the road is long. Markets always recover. They always find something to recover with … it's not just incrementally better GDP … something always comes along … just you wait and see.
Seth Glickenhaus is 94. He's been working on Wall Street since he started as a messenger boy in 1929 and he still goes to work every day. After the Obama election he said: "People don't realise it: bear markets occur in a great hurry. It used to take a year or two, but this time it's taken a matter of months."
.......... are you ready for it..... yes the soft depresession I've been carrying on about on this forum for most of this year. 
