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Crash, Bang, Wallop (Today's economy reminds me of the 1930s)
The Wall Street Journal ^
| January 5, 2004
| EDMUND S. PHELPS
Posted on 01/05/2004 6:23:54 AM PST by presidio9
Edited on 04/22/2004 11:50:45 PM PDT by Jim Robinson.
[history]
Booms are not all alike. Nor slumps. Shocks and institutions are never exactly the same. Yet the late 1990s boom, the slide into slump and recent rebound has a striking similarity to the boom of the roaring 1920s, the deep decline in the early '30s and initial rebound. I see the two experiences as primarily driven by analogous forces and common mechanisms -- both non-monetary. And I believe that the rest of the present decade will tend, barring new shocks, to resemble the rest of the '30s -- a recovery with investment and employment below historical norms.
(Excerpt) Read more at online.wsj.com ...
TOPICS: Business/Economy; Culture/Society; Editorial; Government; Miscellaneous; News/Current Events
KEYWORDS: 1930s; ohnohekilledeconomy; theskyisfalling; thosebastards
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1
posted on
01/05/2004 6:23:55 AM PST
by
presidio9
To: presidio9
I had this same thought in passing a few months ago.
2
posted on
01/05/2004 6:29:24 AM PST
by
RiflemanSharpe
(An American for a more socially and fiscally conservation America!)
To: arete
ping
3
posted on
01/05/2004 6:37:52 AM PST
by
sarcasm
(Tancredo 2004)
To: Tauzero; Matchett-PI; Ken H; rohry; headsonpikes; RCW2001; blam; hannosh4LtGovernor; ...
Ping to the (un)usual suspects.
Richard W.
4
posted on
01/05/2004 6:40:26 AM PST
by
arete
(Rebellion to tyrants is obedience to God.)
To: presidio9
Does anyone have any thoughts on the spike in gold this morning?
5
posted on
01/05/2004 6:59:39 AM PST
by
the gillman@blacklagoon.com
(The only thing standing between the rule of law and anarchy is that conservatives are good losers!)
To: the gillman@blacklagoon.com
I was wondering about that myself. Silver was going to the moon as well. Have the PTB given up on manipulating PM's, or are they positioned to take advantage of the rise.
6
posted on
01/05/2004 7:16:26 AM PST
by
steve50
("There is Tranquility in Ignorance, but Servitude is its Partner.")
To: Mitchell
Bump.
7
posted on
01/05/2004 7:21:15 AM PST
by
Mitchell
To: RiflemanSharpe
So did I, but this author neglects discussing one of the biggest factors in the investment cycle: the effect that government can have through taxation and regulations!
When the government increases taxes and regulations, it can remove all incentives to invest - and the economy can go belly-up (or stay in the dumps).
Much of the 1930's recession/depression was "helped" by FDR's wonderful socialists schemes that would have the U.S. emulate U.S.S.R. Some economists argue that the depression would have ended years earlier (it ended only because of WWII and the need for a war-time economy) and without a war, if the government had not intervened!.
Mike
8
posted on
01/05/2004 7:29:55 AM PST
by
Vineyard
To: the gillman@blacklagoon.com
Does anyone have any thoughts on the spike in gold this morning? Yeah, I wonder if that golden spike driven into the railway way back when is still there?
9
posted on
01/05/2004 7:33:27 AM PST
by
theDentist
(Tagline deamed un-inhabitable. Condemned. New Location sought....)
To: presidio9; arete
Booms are not all alike. Nor slumps. Shocks and institutions are never exactly the same. Yet the late 1990s boom, the slide into slump and recent rebound has a striking similarity to the boom of the roaring 1920s, the deep decline in the early '30s and initial rebound. I see the two experiences as primarily driven by analogous forces and common mechanisms -- both non-monetary. And I believe that the rest of the present decade will tend, barring new shocks, to resemble the rest of the '30s -- a recovery with investment and employment below historical norms. The author makes a good point about things not being the same, but I think he's overlooking what happened in the stock market in the 30's. After the initial drop in the Dow in 1929, the stock market made what, at the time, appeared to be a decent recovery in the months that followed. But right at the time when investors had recovered a good part of their losses and it looked like another bull market had started, the bottom dropped out. The initial drop in 1929 was nothing compared to the way the market cratered in the following years. Maybe that won't happen this time, but my gut is telling me that we could see a another big drop, not just mild correction from todays levels.
10
posted on
01/05/2004 8:32:26 AM PST
by
Orangedog
(Remain calm...all is well! [/sarcasm])
To: RiflemanSharpe
"I had this same thought in passing a few months ago." Yup, me too but, it was due to the 'war' situation around the world, a lot of festering unrest, everywhere.
11
posted on
01/05/2004 8:33:44 AM PST
by
blam
To: presidio9
can anyone of these rear window people see the world as it is today with billions of people trying to get the "comfort" that goes with the American lifestyle? that is why nike, coca cola etc are everywhere and there would be a couple of home builders out there with equally recognizabel names if the world built more houses using wood instead of mud as found in Iran.
12
posted on
01/05/2004 8:47:47 AM PST
by
q_an_a
To: presidio9
Edmund Phelps
Ok, here's the deal in an economic nutshell. Keynesians like Phelps have been wrestling and looking at the 1930s (for decades) from a demand driven prism and still haven't figured it out. Witness this article.
The depression was a MONETARY (read Milton Friedman) and TRADE (Smoot-Hawley tarrif) driven economic event. End of story.
13
posted on
01/05/2004 8:48:05 AM PST
by
gipper81
(Kofi Annan, The Hague, the French, the Guinean foreign minister ... the usual suspects)
To: gipper81
The depression was a MONETARY (read Milton Friedman) and TRADE (Smoot-Hawley tarrif) driven economic event. End of story. Shhhh. You'll wake the protectionists. Globalism is BAD! Haven't you heard?
14
posted on
01/05/2004 10:03:46 AM PST
by
presidio9
("By extending the reach of trade, we foster prosperity and the habits of liberty." -Adam Smith)
To: presidio9
If WW2 had started in 1934, and we had a non-socialist as President, it would be a better comparison.
15
posted on
01/05/2004 10:30:30 AM PST
by
thoughtomator
("I will do whatever the Americans want because I saw what happened in Iraq, and I was afraid"-Qadafi)
To: presidio9
A stock market crash and the fallout from huge financial losses are unlikely now. Short selling on down ticks is no longer allowed and margin purchaes are much lower now. Nt to mention the incredible diversity of the markets and investments today as compared to then.
16
posted on
01/05/2004 10:34:46 AM PST
by
1Old Pro
To: djreece
marking
17
posted on
01/05/2004 11:13:16 AM PST
by
djreece
To: Orangedog
Yeah, the biggest run-ups in stocks occurred in 'sucker's rallies' in the years following 1930.
18
posted on
01/05/2004 12:08:38 PM PST
by
expatpat
To: 1Old Pro
Nt to mention the incredible diversity of the markets and investments today as compared to then. Diversity in the markets is always a good thing, but some of the investment vehicles that have become widespread, like derivatives, can be dangerous to the market as a whole. Long Term Capital Management comes to mind. They wound up on the wrong side of the market and may have taken the whole thing down if Greenspan had not orchestrated a bailout.
19
posted on
01/05/2004 12:39:45 PM PST
by
Orangedog
(Remain calm...all is well! [/sarcasm])
To: Vineyard
Exactly. The really important thing about this recovery is how it's being driven by the Bush tax cuts, especially the dividend tax cut. That's changed the environment in a very important way. By cutting the tax on dividends 50% Bush has made equity investing vastly more attractive than it was immediately befroe the cut.
The wonderful effects of this are obvious. Many people are encouraged to invest in equity securities instead of debt issues, thereby pushing up the market and causing thousands more investors to enter the equity markets. People whose holdings appreciate are more llikely to spend some of those gains on large, expenseive goods like new cars and boats, increasing employment for thousands of others. Finally, the change in investing emphasis to equity will mean the economy and businesses are less burdened by debt than earlier, thereby strengthening the recovery.
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