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« Consensus Count Forming | Main | The Kondratieff Indian Summer Brings Global Winter »

Tuesday, January 20, 2009

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MHD

Yelnick, thanks for all the interesting posts. I have been reading your views and those who post here for years, and I thought I would just thank you for sharing your insights and others!

da bear

I see that 1. says that by the Spring of 1930 we were starting to come out.

Where did you find that from?

I know the stock market recovered into the Spring of 1930 but then it crashed again, and I would assume, taking the whole economy with it.

Up until recently the stock market of today was playing out just like the 1929 to 1930 period (just more drawn out over time).


da bear

Meet the new New Deal. Same as the old New Deal.

min

So in this century it looks like the U.S. has taken Great Britan's place and China is now in the U.S. slot?

Canadian Money

1929 Bear...a few numbers for reference

Sep. 1929 DJIA peaked at 381.17
Nov. 1929 DJIA low of 198.69 (-48% in ~2 months)
Apr. 1930 DJIA peak of bear rally at ~295 (+48%)
July 1932 DJIA extreme bear bottom of 41.22.
Total Bear... 89% decline

CM

Pathrick Neid

I have waited for thirty years for the Austrian school and often said in the interim it would take a depression for folks to stumble onto the adult solution.

That said, in the passage of time, I think I'll continue to be wrong/wait no matter what course the economy takes. Politicians have long since passed to the dark side. They would rather we morph into an Orwellian world than give up control.

yelnick

da bear - the GDP numbers were coming back in 2Q30. we passed the smoot hawley tariffs around then to deal with competitive devaluations, and they began the downward spiral, not the market drop. Huge mistake.

min - not yet. US had become the great industrial power in the 1890s, and after WWI held 40% of the world's gold and an economy left standing. Britain made its mistake of setting the pound to the pre-war gold price in order to keep the US at bay as replacing it. China has a ways to go to get there, and its currency has no global presence of the sort that would make nations rely on it as a reserve currency. Depending on what mistakes the US now makes, China may get there; but more likely China plus the oil states force the US to a new gold standard and wrest control away over time.

min

Yelnick:

I can see that. I feel China will have to totally give up its communist ghost somewhere along the way as well.

min

Closed NDX long for a nice 1 day gain

yelnick

Min - the more interesting analogue is Japan 1989. In what I think a huge mistake, James Baker, new Treasury Secy of Reagan II, coordinated a drop in the Dollar from 160 in the Dollar Index to (much to his surprise) 80 over about a year - 1986! This made the Yen rise from 240 to 120 to the Dollar, a doubling of value in a year, and spurred the Tokyo Real Estate Bubble. At the time the US was fearful of Japan as the Next US and talked the G7 countries into this competitive devaluation to improve US exports. I find this a similar mistake to Lord Norman of the Bank of England in 1925 pushing Churchill to set the Pound too high and strong-arming the governor of the NY Fed (bad pun) to drive US rates to low levels. In both cases a bubble emerged - NYSE 1925-1989 and Tokyo Nikkei 1985-1989 - and burst badly. Just as the Pound/Dollar discussions from panics in 1893 (when the BoE tried to bankrupt the US Treasury), 1907 and 1919 caused a bad policy to emerge, one can see the Dollar/Yen ratio as at the heart of major bubbles and crashes since at least 1987. The US has seemed to be more successful than the British at keeping Japan at bay and NYC in the financial drivers seat. Keep in mind that Japan has the #2 economy, ahead of China; and the US dwarfs them all, having GROWN GDP during the Bush Bubble by more than China's WHOLE economy. We grew a China from 2004-2007.

dlu

yelnick what about other BRIC economies?

yelnick

dlu - neither R or B have the scale or productivity to ever rival the US. And R is collapsing, which makes it dangerous - and money will not trust a dangerous currency. Everyone picks C, but C is highly leveraged. It runs factories at low margins, sometimes below marginal cost but just enough to pay debt service, and then more is borrowed. That economic foolishness is now over, and C will have a huge reckoning. Maybe it emerges in 20 years stronger, and then we can see. I is in better shape, and is a more trustworthy country, but is beset with an unstable neighbor (Pakistan) who is likely to dissolve over the next five years and plague Indian stability. I bet on the US, unless Obama (and his successor) really screw the pooch.

dlu

Agree yelnick, pakistan is precariously placed and its existance depend on US policy. If US stops aid to pak
islamic terror groups will take control and if US continues or increases aid to pak the military will divert that money to extremists. So that is a catch 20
situation for USA and India as well.But ultimately it looks pakistan will disintegrate.

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