Posted on 12/29/2009 1:38:46 PM PST by blam
Economic Depression, Just Not That Simple
By Bill Bonner
12/29/09 Ouzilly, France We are looking back at the year almost finished, and trying to figure out what lies ahead. The surprise of 2009 was that the stock market didnt turn down again. Stocks worldwide were cut in half. Then, they bounced. A textbook, classic bounce Normally, youd expect the bounce to peak out after 5 or 6 months. This one hasnt yet. Our guess is that it will
Of course, we could be wrong
The classic depression a la Japan comes about when an economy needs to make some fundamental changes. It discovers that a lot of what it has been doing was wrongheaded. Assets, valued at bubble levels, need to be marked down. People need to find new jobs; because the old ones no longer make sense. Businesses need to be restructured and retooled. Households, typically, need to stop spending and pay down debt.
This process is long and hard. The story of bubbles always begins cheerfully enough. But it always ends at Chapter 11, in long workouts painful write-offs and court cases.
Recession Begins Flooding into the Courts, says a headline in yesterdays New York Times.
If this were a classic depression, we could anticipate another leg down in the stock market more unemployment and on-again, off-again growth over the next few years.
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