Great Depression--The Parallels--Update
Confidence and the Role of CPI and Tbills
Chart
Dow Jones Industrial Average vs Inflation and Interest Rates
5.5 years--August 31, 2007--February 28, 2013
which parallel
5.5 years--July 2, 1937--December 31, 1942
Weekly
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THIS CONTINUES A LONG-RUNNING COMPARISON
All still on track. Stock prices track downward. Inflation is low or dormant. U.S. Treasury Bill rates stay at subterranean levels similar to those seen in the 1930's. No hint here of confidence coming back yet--the fuel needed for definitive and 'permanent' (70-year) recovery.
The current booming rally from early March of last year has now exceeded by large magnitude and duration the comparable big 1937 rally.
Why? Shock and awe this time around. Governments are powerful and clever. That is, the institution is powerful. The people who run it--legislators, prime ministers or presidents (and dictators) who are politicians first--elected by voters--are clever. Today they are more clever because now they have more clever and faster tools than 70 years ago.
Thus their massive invasions into the structures and mechanics of the financial markets is in some respects more beneficial and in most respects more disastrous if continued.
Large-scale market manipulation is possible today in ways that it was not during the 1930s. The price to be paid later for such behavior, if it is in fact going on, will be much higher and last longer than otherwise.
Today there is gross intrusion into the structure of the free markets, which goes beyond appropriateness. The SEC's overnight banning of short sales of specific financial companies worldwide is without precedent. Now Germany has followed suit and threatens to extend the ban to all German stocks.
With parallels continuing to prevail, the current mess is likely not to end without a two-to-three year decline terminating in 2012--with perhaps the biggest drop of all in the whole sequence. That may be necessary to climax the mass dysconfidence factor among the public, which accompanies the unprecedentedly large, intrusive, opaque, and manipulative remedies that the State has mandated already . . . with more on the horizon.
Caveat. Nevertheless, be aware of the trickiness of juggling patterns and parallels. See patterns and perceptions
here.
Previous articles tell what is being measured and why and allude to the possible root cause. The popular, proximate causes identified by media, government, public, and academia, are financial. However, I believe that they are merely symptoms, and the efficient cause lies elsewhere--singular, simple, but difficult to identify. It is amplified and identified here and other places on the site.
Written
11/20 - 11/22/2009
Posted
11/22/2009 4:50 p.m. ET
Current Update
5/31/2010
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SN210H 5-20-1939 9-27-2009 240 2-14-1942 *10-17-2012
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