Monday, Dec 15, 2008
It's only a recession until the government sticks its nose in
Prudent Bear: How recessions become Great Depressions
The preconditions for recession in 1921, 1929, 1947 and 1981 were similar to today. In each case, a large percentage of U.S. assets, built up over the preceding few years, had become obsolete and needed to be scrapped. All of these downturns involved an "overhang" of assets that were no longer worth their cost, and the associated debt defaulted. This is similar to the housing overhang of 2008. Only in 1929-30 was the overhang less obvious initially, but an overhang was produced during the downturn by the insane political imposition of the Smoot-Hawley act [heavy trade tariffs], decimating world trade. By contrast in 1921, the treasury secretary believed in allowing the private sector to liquidate its way out of recession. He therefore organized no bailouts, but instead cut public spending.
20 Comments
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1. drewster said...
Based on history, we'll be ok as long as the government doesn't bail out industry, slash interest rates, increase taxes, or increase spending. Oh dear....
2. crunchy said...
Those that do not study history are doomed to make the same mistakes.
Ben Bernanke?
Gordon Brown?
Go figure!
3. drewster said...
crunchy,
Brown has a PhD in history. Bernanke has written extensively on the Great Depression. We're stuck with the hand we've been dealt.
4. crunchy said...
3. drewster
Too right.
Did you miss my point?
5. drewster said...
Apologies - I didn't realise it was intentional irony.
6. japanese uncle said...
Drewster
I should like to repost the following
-------------------------------------------------------
I have little doubt that the true reason why Barnanke specialized in Great Depression, was not that he was seeking the way to mitigate it in the event of its repetition, but that his mission was originally to recreate the carnage even in the greater magnitude and that in a defensible way by the excuse of 'incompetence', saying "we really did our best, but happened to be not good enough. Sorry mate, but no hard feeling" Running bubble economies and wars are the two greatest and the most lucrative sources of profits for the biggest financiers (not including the peers like Bear Sterns and other less powerful institutions that are about to go under for the next decade to come) throughout the modern history.
7. crunchy said...
I am beginning to think Irony is the key to getting nearer to the truth.
A bit like looking around the box instead of looking in and missing the lable stuck on it.
8. Crunchy said...
japanese uncle
Don't sit on the fence, just come out with it!
lol.
9. beartil2010 said...
I have to agree with JU. These jokers are deliberately causing these problems. Be aware there is a game going on and play along, otherwise you end up with nothing!
It's like a giant game of three shells. Street lags.
10. crunchy said...
So I am not alone.
Thank goodness there are others that are not solely focused on house prices and running down G. Brown.
Know how the game works and watch both of your opponents hands.
11. drewster said...
It doesn't make any difference whether I agree with what JU says. Believing that the bubble was manufactured doesn't help me get on the housing ladder, does it?
12. crunchy said...
Not yet. When that happens you will have a much better chance of keeping that house and a lifestyle to go with it, if you stay one step ahead of the game.
Too stay ahead of the game you have to know what's on the other side of the rule book. That's the part most players don't even know exists.
The loaded dice.
It's not just about knowing economics. That as we know can do some very strange things.
The rules are simple it just takes a flip over the the other side.
13. drewster said...
crunchy,
All you need for keeping that house + lifestyle is a reliable income stream. For most of us that means having a reliable well-paid job; for the lucky few it means living off income-producing assets (such as high-yield shares, property, bonds, or just bank interest). I don't see how all this "other side of the rule book" stuff applies in real life? Would be grateful if you could explain it to me!
14. str 2007 said...
Crunchy
Just to make it clear so I don't make any mistakes - what's on the other side of the rule book ?
And what are the simple rules you're playing the game to ?
15. crunchy said...
13. str 2007
Somehow I don't think this is a serious question.
But the simple rule is not to take anything you are told by the government at face value. In fact quiet the opposite.
The other side of the rule book is a shift in mind set. That is more difficult than it sounds because it means to admitting you have lived a lie most of your life.
This is happening to me and everything is just falling into place. Nothing is ever totally clear but for me it's getting clearer as time move along. Good enough for me.
Money.....Did you know that I knew that oil was going to go down to 50dollars before it happened. Who could have guest.
When the government said that stocks were strong people on the OTHER SIDE were shorting.
At the peak of the housing market..STR 2007 some sold up their stock.
The more you listen the governments the poorer you become. It's that simple.
16. str 2007 said...
Crunchy
It was a serious question.
Early 2007 is when I started posting here (I posted elsewhere previously) I actually STR in 2004 Doh, so don't pay too much attention to my predictions. Right in the end but no herd menatality was factored in.
Equally I'm not sure enough people factor in 'bail out money' to their HPC equation. But I could be wrong there as well.
17. crunchy said...
16. str 2007
Sorry to hear that but playing housing bubbles is easier than anything else because it is illiquid. Even if you were to have sold 6 months ago at a 10% reduction you could have changed your monopoly money for the real stuff. It's just a shame that people have to do gymnastics to keep their money. That is just how it is.
When a government can ignore a whole generations needs, I just dont get why people still think that they are really OK and that it's all been some silly oversight.
Too me it's so obvious what's going on. Thats why it was easier for me to make the shift. No turning back thank goodness.
str you may already know, but there is really a small group of people that control world affairs and they don't appear on TV. It's been proven to me beyond doubt.
Everyone has a choice.
I know I made the right one. Im on the internet to learn some more while it is still around in it's current form.
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