18 June 2008
The Truth About the Economy
Posted by Joy Bischoff under: World Economy .
This introduction by John Mauldin sets up a very important, albeit long, article explaining the coming economic reality. Not for the faint of heart, those who want the blinders off in order to make good decisions should follow the link and read the article. Thanks to Peter Anderson for sending this along.
The Road To Revulsion
by John Mauldin
What does a bubble look like and how do they end? In this week’s Outside the Box, James Montier of Societe Generale in London looks at not only the psychological analysis, but also at the propensity for commentators to continually proclaim the end of the problem and a resumption of business as usual. He includes a fascinating piece from Marc Faber documenting the various quotes about how well the economy was doing from 1928-32. This makes for fun, if a little sobering, reading.
To quote from his summary:
“We have seen the heads of virtually all financial institutions stand up over the last few months and claim the worst is behind us. Why would anyone listen to these people? They didn’t see the disaster coming, and yet somehow they are qualified to tell us it is all alright! Perhaps I am just unduly sceptical, but this reeks of a conspiracy of optimism. The recession has barely started, let alone reached its nadir. The market moves of late have all the hallmarks of a classic sucker’s rally. This isn’t discounting the recovery, this is denial! Far from being behind us, the worst may well still be ahead!”
4 Comments so far...
Sharon Anderson Says:
18 June 2008 at 8:38 am.
That is a great article. I especially related to the quotes at the end about the Great Depression which started with the stock market crash in Oct 1929 and lasted into the 1940s. The first ones sound all too familiear–so much like the rosy reports and optimism we hear on the MSM news now. It seems that history IS repeating itself. What are your favorite quotes? Here are some of mine:
2. “There will be no interruption of our permanent prosperity.” - Myron E. Forbes, President, Pierce Arrow Motor Car Co., January 12, 1928
4. “There may be a recession in stock prices, but not anything in the nature of a crash.” - Irving Fisher, leading U’s. economist, New York Times, Sept. 5, 1929
5. “Stock prices have reached what looks like a permanently high plateau. I do not feel there will be soon if ever a 50 or 60 point break from present levels, such as (bears) have predicted. I expect to see the stock market a good deal higher than it is today within a few months.” - Irving Fisher, Ph.D. in economics, Oct. 17, 1929
The market went into decline until Monday, October 21st, 1929
“He dismissed yesterday’s break in the market as a ’shaking out of the lunatic fringe that attempts to speculate on margin.’” - Irving Fisher, The New York Times, Oct. 22, 1929
“Security values in most instances were not inflated”
“The nation is marching along a permanently high plateau of prosperity”
8. “… a serious depression seems improbable; [we expect] recovery of business next spring, with further improvement in the fall.” - HES, November 10, 1929
10. “For the immediate future, at least, the outlook (stocks) is bright.” - Irving Fisher, Ph.D. in Economics, in early 1930
11. “..’there are indications that the severest phase of the recession is over…” - Harvard Economic Society (HES) Jan 18, 1930
12. “There is nothing in the situation to be disturbed about.” -Secretary of the Treasury Andrew Mellon, Feb 1930
13. “The spring of 1930 marks the end of a period of grave concern…American business is steadily coming back to a normal level of prosperity.” - Julius Barnes, head of Hoover’s National Business Survey Conference, Mar 16, 1930
“… the outlook continues favorable…” - HES Mar 29, 1930
14. “… the outlook is favorable…” - HES Apr 19, 1930
15.”While the crash only took place six months ago, I am convinced we have now passed through the worst — and with continued unity of effort we shall rapidly recover. There has been no significant bank or industrial failure. That danger, too, is safely behind us.” -Herbert Hoover, President of the United States, May 1, 1930
Mac Says:
18 June 2008 at 10:15 am.
All I can say is that I hope we turn this around because the consequences are to scary to think about. People aren’t equipped to handle this kind of thing today. Back in the depression people had skills that have been forgotten by most people now.
Benjamin Says:
18 June 2008 at 10:48 am.
Ouch, looks like a repeat of history. Very disturbing article.
Pickles Says:
18 June 2008 at 12:30 pm.
Reading this along with the post from Terrie on news and comments is enough to make me scream. Why doesn’t somebody do something?
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