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Scary Similarities To The Great Depression
Bruce Jackson
Tuesday, September 16, 2008
Last week I said this was “one of the most difficult stock markets I’ve experienced in my 20 years of investing.”
I was clearly wrong.
It is definitely the most difficult stock market I’ve experienced in my 20 years of investing.
All of a sudden, this week the stock market just got a whole lot tougher. And it’s not just the stock market you’ve got to worry about…
What about the financial health of your broker?
What about the financial health of your bank?
What effect are these plummeting stock markets having on your pension? Has it affected your retirement date? Has it affected your living standards in retirement?
(ARTICLE CONTINUES BELOW)
House prices continue to fall, whilst interest rates and mortgages remain steadfastly high. People who bought in the past 12 months will likely be sitting on negative equity.
What about your job? Is that secure? You may already be out of work. What are your prospects for future employment? Will you have to take a pay cut? City workers will obviously have to forget all about 6 and 7 figure bonuses.
If you do suddenly become unemployed, will you be able to pay the mortgage? For how long? What about private education for the kids?
A Once In A Century Event
I don’t mean to alarm people, but when you hear people like Former US Federal Reserve Chairman Alan Greenspan say “This is a once in a half century, probably once in a century type of event. We shouldn’t try to protect every single institution. The ordinary cost of financial change has winners and losers.” you know things must be bad.
Alan Greenspan is 82 years old. He’s seen the 1973-74 bear market, where the US Dow Jones Industrial Average lost 45% in around 2 years. To put that into perspective, if the FTSE 100 were to lose 45% from its recent peak of 6730 in October last year, we’d be looking at the FTSE 100 bottoming at 3700, still another 30% down from today’s levels.
Greenspan has also seen the collapse of junk bond trader Drexel Burnham Lambert in 1990. He’s seen the Asian and Russian financial crises of 1997-98. He’s seen the collapse of hedge fund Long Term Capital Management in 1998. He’s seen the September 11th 2001 terrorist attacks on the US and the dot com bust of 2000-2003.
Similar To The Great Depression?
Being born in 1926, Greenspan grew up during the Great Depression of 1929 to the late 1930s. That was a once in a century event. Could the current crisis be as bad as the Great Depression?
When you read words like those below on the Great Depression page of Wikipedia, there are some very scary parallels…
“American consumers and businesses relied on cheap credit…This fuelled strong short-term growth but created consumer and commercial debt.”
“Businesses began to fail as construction work and factory orders plunged…Massive layoffs occurred.”
“Banks which had financed this debt began to fail as debtors defaulted on debt…Bank failures led to the loss of billions of dollars in assets.”
“Bank failures snowballed as desperate bankers called in loans which the borrowers did not have time or money to repay. With future profits looking poor, capital investment and construction slowed or completely ceased. In the face of bad loans and worsening future prospects, the surviving banks became even more conservative in their lending. Banks built up their capital reserves and made fewer loans, which intensified deflationary pressures. A vicious cycle developed and the downward spiral accelerated.”
Who’s Next?
As I said, I don’t want to scare you. And in spite of the similarities with 1929, I’m confident this is not going to be akin to the Great Depression. I’m confident most financial institutions will survive and prosper in the years ahead. I’m confident the stock market will recover and be higher than it is today, in the years ahead.
What I don’t know, like just about everyone else, is…
- When will this market bottom?
- At what level will this market bottom?
- What nasties are be lurking in the balance sheets of just about every financial institution?
- Who is next to fail?
What Next?
So what should you do now? Only you can answer that question.
As for me, I’ve been steadily selling some of my riskier smaller company shares. Obviously I should never have bought them in the first place, but hindsight is a wonderful thing.
I’m maintaining a healthy cash balance. But I’m not selling my holdings in quality companies. Sure I’d have been better selling everything a few months ago, and I might even be better off in a couple of months’ time if I sold everything today, even at these depressed prices. But I’m willing to hang on in there, believing better times will be ahead.
I don’t need the money I’ve invested in the stock market today. I won’t need it in 5 and 10 years’ time. That is one of the keys to investing, one of the original tenets of The Motley Fool from when we first launched here in the UK back in 1997 – invest with a long-term perspective and invest with money you don’t need to touch for 5, 10, 20 years or more.
Things will get better. I just don’t know when.
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13 Responses to “Scary Similarities To The Great Depression”
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September 16th, 2008 at 12:06 pm
It’s time for people in masses to start lobbying their local congressman with Larouche PAC’s Homeowners and Bank Protection Act.
http://larouchepac.com/hbpa
I also recommend sending DVDs or the link to the movie to people of LPAC’s movie “Firewall in Defense of the Nation State” I havn’t seen a more detailed movie yet, in regards to the true state of our economy, and how it copies Wiemar Germany’s hyperinflation.
http://larouchepac.com/firewall
And for additional information on the American System of Economics as proposed by Alexander Hamilton, carried out by Abraham Lincoln and Henry C. Carey, and later FDR during the Great Depression I recommend “1932: Speak not of Parties… But of Universal Principles” on the LPAC website too.
And the Harvard Yard is yet another movie by the members of LPAC about the subversion of the American educational institution, dating back to the Revolution itself. Harvard was the 1st university of the 13 colonies, so naturally just as it is on here, and today, it was then too… an info war, and the destruction of our education contributes to that.
and heres a new 12 min film from LPAC with background information on the California budget crisis and who is behind the whole thing…
http://larouchepac.com/news/20…..risis.html
September 16th, 2008 at 1:11 pm
Poor mister Bruce Jackson. I’d say his money will be gone, and gone forever. He better collect it at the next big spike upwards. Then try to buy a house somewhere far far away from the East and West. Then use rest of his reserves on gas masks, protection, a decent bunker and lots of food.
I think that’s the best chance he’d have to survive. Instead of having faith in a sinking ship.
And as we all know, sinking ships don’t rise up again (by themselves).
- JC
September 16th, 2008 at 1:33 pm
A depression will come and there will be riots in the streets.
Prepare for false-flag terrorist attacks being blamed on American Patriots.
The NWO is going for broke on EVERY front.
September 16th, 2008 at 1:49 pm
Yeah hold on to your cash…until the day comes when it’s less valuable than toilet paper. Then you have a bunch of PAPER.
You fools who didn’t buy gold….my heart goes out to you. I didn’t either. We’re morons.
Now I live pay check to pay check just like so many of you from things like medical bills and such. What a RACKET!
All I hope is that many HOLLYWOOD players end up homeless over this. Celebrities on the streets suffering from poverty….yeah….go the full monty.
September 16th, 2008 at 2:23 pm
The American Ruse &
when Black Friday comes.
Honesty or lies?
Compassion or greed?
Intelligence or narrow-minded?
Guts – or go along to get along?
Ralph Nader
Cynthia McKinney
Ron Paul
Mike Gravel
Dennis Kucinich
Jesse Ventura
H. Ross Perot
President Carter
JFK RFK MLK Malcolm
September 16th, 2008 at 2:29 pm
This is the big one in my opinion, the US dollar will collapse and then begins the transition to a single global currency.Israel is a key player in all of this.I recommend you study the israeli economy closely and see how it seems relatively unscathed by the global economic crisis.I like others missed out on investing in gold largely bacause i was penniles before the crunch and am even more penniless now,hoorah for the NWO what bastards they truly are!
September 16th, 2008 at 3:24 pm
Greenspan created this shit. And now he’s creating the panic. Why don’t this author comment on that? It’s because he knows (just like the other Wall St. con artists know), how to invest in losing stocks. This guy is full of the same shit that Greenspan is. He’s going to profit by this, just as the cat turd face Greenspan has. Fuck you AND your investments.
September 16th, 2008 at 5:08 pm
Hey all you patriot dudes out there,if you want to see the ideal survival-patriot super-hottie lady (not “R” rated) strictly “PG”,then go to DontTreadOnME.tv and click on “Testamonials”, click the video link that pops up and see such a fine lady that really pours out her heart to the patriots and tells about how she is trying to wake people up and stuff like that. The world needs more tough women like her.
September 16th, 2008 at 8:01 pm
Stock up on Ammunition. As things get bad, people get desparate. Your gold on’t do you any good if you can’t defend it.
September 16th, 2008 at 8:38 pm
“Scary Similarities To The Great Depression”
Nice fearmongering. Which economics expert here, without consulting your favorite research tool, Google, can tell me why this is NOT even close to 1929? Without using Google, mind you. Yeah, yeah, I know, without Google (who you think is evil, but still use), you’re handicapped intellectually. Show me your economic savvy “truthers.” LOL
September 16th, 2008 at 9:24 pm
Sounds like dRapNOid is bitter and frustrated after a failed life in which he works a dead-end job for minimal pay and gives most of his income to support the evil, murderous U.S. Government.
September 17th, 2008 at 12:52 am
What’s ironic about $’s comment, is the “fact” that he should care about what “zealots” have to say in the first place, or even that his comment would sway us in the slightest. Not only did his comment not contain any relic of reasoning, but it did not contain a single fact to support his imposition.
Furthermore, he knows full well what the arguments are on both sides, and knows that post served as a tiresome, irritating “poke” in our general direction.
He is an example of a human and sociological TRAGEDY.
The true tragedy is that humans have been convinced, over time, to believe that there is no such thing as “truth”. The very idea of truth has become an irrationalist’s conception, where subjective aesthetics and “opinion” dominate the cultural world view.
In the education system, truth and reason have been replaced by formula and “fact”.
We now live in a world of “facts”. The value of a human being to actually use his mind to REASON has been taken out of the culture. The printed and official fact is the new cultural dogma. Obey the “fact” and ignore the reason.
For example, if I say 2 + 2 = 4 it is indeed a fact. Without any context of REASONING however, it is completely and utterly meaningless. Likewise, the concept of “number” itself is meaningless if it is not demonstrated or identified in some way in the REAL WORLD.
The number 3 is just a wiggly line on a paper. However, if I UNDERSTAND its reflection in the world, the REASONING now becomes clear. If I know that the number 3 represents 3 equal parts of a length of a stick, then and only then, can I apply it to the MIND, and KNOW what “3″ means in this context. The number “3″ now becomes a conceptual idea of RATIO, and the idea of ratio can be understood well in the mind, whereas the number “3″ cannot.
The point is, if you simply flip around looking for “facts” without ever understanding (or seeking) their context and reasoning within the real world, then there is NEVER any way to know whether or not the given fact is indeed truthful or not. You can NEVER know whether something is truthful or not, if you do not apply your REASONING abilities within the context of the subject matter being defined.
For example, I can claim that Russia brutishly and ruthlessly attacked Georgia without any rhyme, reason or provocation. If I know NOTHING else within the CONTEXT of this situation, how can I POSSIBLY make a distinction about the truth of the matter? All I could do, is pick an “expert” or pundit of whom I felt comfortable, and simply “go along” with their silly presentation of “facts”, of which IRREGARDLESS to the matter, some of which are true.
However, if I understand the entire CONTEXT and HISTORY of this region, and if I understand WHO these people are, WHERE they came from, what their history of action has been in the past, and what their motivations are, then I can make a REASONED determination without having to listen to a single “expert” or pundit’s “facts” of the matter.
$’s comment is a reflection that he knows that SOMETHING is wrong, but is too scared or prideful to want to go from the realm of facts, into the realm or reason.
The SHOCK would be too great. The shock of knowing that Paulson is indeed an idiot (or perhaps a servant) who bumbles around protecting the interests of FILTHY rich Oligarchs would be too great. The shock of realizing this would also bring FURTHER truths of which there realization would again be, too shocking.
You see the “fact” (no pun intended) of the matter, is that the “economists” and “experts” did not see this coming. The only thing then, one must ask is, “why?”
Why is it that many of the “crazy” people saw this economic collapse, but none of the “sane” people? The SHOCK and reality of that question and realization is enough to alter the very core of a “sane” person. It is too difficult for some to handle. Jack Nicholson was accurate to a large degree with his assumptive epigram, “You can’t HANDLE the truth”.
You see, many people simply don’t believe in evil. They instead believe that things are “complicated” and that “mistakes” are made. They can most likely understand of certain evil individuals, such as Saddam Hussain and Hitler, because their specific atrocities were endlessly reported in the media. But what many won’t ever learn about (because the information rarely receives a stamp of approval from the media) is certain other individuals, such as Henry Kissenger or even Lord Palmerston who have been responsible for ENORMOUS suffering in the third-world, the former of which is a wanted criminal in many countries around the world.
Is it worse to be felled by a knife, or by starvation? Most wouldn’t know the answer to that. But if starvation is worse, than Kissenger and Palmerston are certainly some of the most evil men to live in human history.
Stamped and approved? No. Truth? Yes.
In the final analysis, in our current economic crisis, as reality draws nearer and nearer, one can decide to believe the “economic” “experts” (who are truthfully amateur accountants) who have been PROVEN wrong, time and time again, over and over and over, OR, you can believe those certain “crazy” forecasters whose predictions are becoming utterly IRREFUTABLE day by day.
The choice is a simple one, but it is YOURS to make. But remember, if you’re not part of the solution, you’re almost certainly part of the problem.
http://www.larouchepac.com/
September 17th, 2008 at 8:30 am
In other words, “Paulson is an idiot” is too uneducated to answer the question. He uses a lot of words to say very little. Nice subterfuge. In the final analysis, “Paulson is an idiot” is an idiot, obviously lacking even the basic economic education to understand what he is parroting from some website or the Alex Jones show.
So, can anyone ELSE answer the question?