There Are Alarming Economic Similarities Between Now And 1873

BI ^ | 11-4-2014 | John Mauldin

[blam]

John Mauldin
October 4, 2014

“The significant problems that we have created cannot be solved at the level of thinking we were at when we created them.” – Albert Einstein

“Generals are notorious for their tendency to ‘fight the last war’ – by using the strategies and tactics of the past to achieve victory in the present. Indeed, we all do this to some extent. Life's lessons are hard won, and we like to apply them – even when they don't apply. Sadly enough, fighting the last war is often a losing proposition. Conditions change. Objectives change. Strategies change. And you must change. If you don't, you lose.” – Dr. G. Terry Madonna and Dr. Michael Young

“Markets are perpetuating a serious error by acting on the belief that central bankers actually know what they are doing. They do not. Not because they are ill-intentioned but because they are human and subject to the limitations that apply to all human endeavors. If you want proof of their fallibility, simply look at their economic forecasts. Despite their efforts to do so, central banks can’t repeal the business cycle (though they can distort it). While the 2008 financial crisis should have taught them that lesson, it appears to have led them to precisely the opposite conclusion.

“There are limits to knowledge in every field, including the hard sciences, and economics is not a hard science; it is a social science whose knowledge is imprecise, and practitioners’ ability to predict the future is extremely limited. Fed officials are attempting to guide an extremely complex economy with tools of questionable utility, and markets are ignoring their warnings that their ability to manage a positive outcome is highly uncertain.

(snip)

[dr_lew]

Boy, that’s a long article! My two cents is that I felt he underplayed the role of railroad growth, focusing on the monetary aspects. I always understood that the railroads grew in response to seemingly insatiable demand, but in true rubber band fashion, overtook the demand and went steaming into the station. A classic boom and bust cycle.

[AceMineral]

There were a lot of railroads to nowhere. It took almost a century for the railroad industry to become rationalized. On most days I like my shares of Norfolk Southern, but there are days when I want to tear their tracks up.