Comparing the Great Depression to today

In the '20's traders could beat the margin rules. They would take possession of certificates, deposit them in a bank and borrow on them, buy more, deposit again, repeat the cycle, they could have had a million to one leverage with six trips to the bank, if the bank would not flag them for what they were doing. I don't know if any bankers caught on and really, they could work around the bankers by using six different banks... that is eerily similar to the current crisis really, what with the non transparent derivatives markets..

More money was lost in the initial market crash than was in circulation. We have about two trillion dollars in circ currently...
 
There are hobos all over the place.

I see them in the grocery store, with electronic debit cards provided by the government, buying all kinds of groceries and junk food and candy.

I also see more people with signs on expressway ramps than ever, and when I went to the Register of Deeds Office to make sure a Warranty Deed has been properly recorded, I saw 7 people doing nothing for every 1 person that was actually working, as an approximate ration, at that governmental agency - those do nothings are hobos; they're just not desperate because the government is giving them a salary with full benefits.
 
I think its important to make a distinction between inflation as we saw in the 70's and what is more likely to happen now.

Back in the 70's you had wage-price inflation. Prices rose, and wages needed to rise to meet those price increases. Unions could force management to meet these demands until they were broken in the 80's.

In our current world of globalization, job outsourcing, and dimming employment prospects for most, you can't tell me that there is going to be a new round of wage inflation based upon increasing prices of commodities. Commodity prices may rise, but wages are capped on the upside for all but a few select and lucky few.

We will no longer have increasing asset prices to allow for debt fueled equity extraction as a buffer to stagnant wages. That gambit has been played out to the end.

And don't forget that rising taxes are a given, particularly for the wealthy.

In any case, there is no more elasticity to be wrung out of the system. Price increases will be met with demand destruction as there simply is no where to go for the extra. Further downsizing by families caused by rising taxation and rising cost of living will take away more from consumer consumption and further depress asset prices (esp. real estate).

I'm not saying that there won't be increases in commodity prices. But to expect a redux of the 70's wage-price spiral is absurd. Not happening.
 
Steph, as usual, you bring value to any discussion.

Higher taxes, high unemployment, high inflation of raw commodities, and hence, durable goods, and falling wages (or even stagnant ones)?

Sounds like the perfect recipe to create an economic depression to me...
 
I'm more with you than not but I'm no where near as adamant in my view. Don't pretend that job loss wasn't every bit as dramatic in the 1970's. These Johnny come lately "out sourcing" youngsters crack me up. We lost whole industries including steel, consumer electronics and auto parts to Asia in the 1970's. Millions of uneducated, unionized, white guys were thrown into a jobless early death. Stocks were chopping back and forth underneath a decade old high, baseball teams were lucky to draw a million fans, commodity prices were through the roof and wages still grew.

Yes, I'm a worst case enough scenario thinker to look for something worse than the 1970's fractals. But until it's not it is and while I strongly believe the economy will me mired in upheaval for years to come, I make no ipso-facto conclusions about future stock, bond, exchange rate or commodity valuations. It's unknowable. Just the same my bets have been on deflation the past week but I think we've got one more leg up before a key inflection point is in place. There's no tangible evidence that we're not straight on the 74-75 train until we see a dollar low, bond low, commodity and stock top develop. Maybe sooner than later though...


Quote from drsteph:

I think its important to make a distinction between inflation as we saw in the 70's and what is more likely to happen now.

Back in the 70's you had wage-price inflation. Prices rose, and wages needed to rise to meet those price increases. Unions could force management to meet these demands until they were broken in the 80's.

In our current world of globalization, job outsourcing, and dimming employment prospects for most, you can't tell me that there is going to be a new round of wage inflation based upon increasing prices of commodities. Commodity prices may rise, but wages are capped on the upside for all but a few select and lucky few.

We will no longer have increasing asset prices to allow for debt fueled equity extraction as a buffer to stagnant wages. That gambit has been played out to the end.

And don't forget that rising taxes are a given, particularly for the wealthy.

In any case, there is no more elasticity to be wrung out of the system. Price increases will be met with demand destruction as there simply is no where to go for the extra. Further downsizing by families caused by rising taxation and rising cost of living will take away more from consumer consumption and further depress asset prices (esp. real estate).

I'm not saying that there won't be increases in commodity prices. But to expect a redux of the 70's wage-price spiral is absurd. Not happening.
More...
 
Quote from countryBoy:

Thoughts? Similarities? Differences?
More...

Oh, yeah, the Reg T was 10% in those days, now it is 50%. A little difference there.

My mother (deceased 20 years) told me that when she was a kid, grown men would knock on the back door of her mother's house (an early widow). This was in the early 1930's. The men, popularly known as hobos, would offer to paint, rake leaves, etc for a meal. Work for food.

Do you see any similarity to today? I don't. [/B][/QUOTE]

Where the hell are you living? My "city" of 60,000 people in the midwest has a food shelter who serves several hundred daily. I would know, I volunteer there.

31 MILLION Americans on food stamps.

You see, there is no need for food lines or door to door begging when the above mentioned are in place.
 
This may not be a chart of hobos, but it is relevant to the labor market:

Jobless Initial Claims:

art01.gif


claimslt.gif


claims.gif


http://online.wsj.com/mdc/page/2_3024-claims-18.html

Also http://online.wsj.com/edition/resources/documents/bbjobs.htm

I'll also post the unemployment chart again:

ecocharts-unemploy.gif


http://online.wsj.com/public/resources/documents/bbemp.pdf
 
Here is the debt of U.S. citizens:

Leverage.gif


Here is the reality of U.S. states:

46-states-face-budget-shortfalls.jpg


Here is the reality of the U.S. federal government:

challenges04.png


And in indirect relevance to inflation... here is the U.S. Dollar against other currencies (till 2008 and has gotten weaker since):

currency-small1.jpg


You decide if the government can solve all these problems. Will printing more money and disrupting the free-market save the U.S.? Look's like were patching our troubles with a short-term horizon and creating an even larger bubble.
 
I assume that some of you (at least the chart) insinuating that the decline of this 08 crash should have similar percentage decline (~80%) as in 1930? Why? How can anyone say that it will be 80, 90 pr 75 percent?
Further I have said this before. The WWI and WWII were both world wars but their similarity ended there....
I have no doubt in my mind that we are not about to recover fast and we are not about to have a V shaped recovery but that is all I can "predict" without my crystal ball...
 
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