Frustration ad inifinitum
And the Role of CPI and Tbills
Meanwhile, Political Theater: The Rants and Raves of the Righteous
Against the Stupid, Greedy, and Wealthy
Chart
Dow Jones Industrial Average vs Inflation and Interest Rates
14 years--January 1, 1929--January 1, 1943
Monthly
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Frustration is the desire to act, or to have something happen, and the inability to make it happen.
Everyone wants the financial crises to end and economic failures to reverse course and recover. I am afraid these sequences will not be hastened by human activity, as well meaning and as well informed as it may be today. More on this below.
THE ROLE OF CPI AND TBILLS
In the chart above, we see two timelines accompanying the Dow Jones Industral Index from January 1,1929 through December 31, 1942.
All three lines are expressions of confidence. Stocks--here the Dow Jones Industrials--are most sensitive and least subject to manipulation. Consumer prices (CPI) are next most sensitive, followed by interest rates--here 91-day U.S. Treasury Bills. CPI can be, and is, manipulated by construction revision. Tbills can be manipulated very short-term, but like stocks, they are truly market controlled (by massive public buying and selling).
See how stocks turned first in mid 1932, followed by the CPI in early 1933. This was good for a mighty rally in stock prices, but unconfirmed by the Tbills timeline, which continued flatlining until 1937 and then again until 1942 when it rose once more and extended its level of rise while inflation continued to rise strongly. The 1942 bottom in stocks marked the last pivot-point low until the 1961 (temporary) peak in the Dow (20 years later, off chart).
WHAT IS THE MEANING OF THIS SEQUENCE?
The three series are a trio of dancers of pure confidence. It takes major confidence on the part of the public (I include institutions and individuals--the whole non-goverment sector) to buy stocks. Next, it takes spreading confidence in the prices of goods and services for the public to buy and for companies to manufacture and provide. Finally, it takes the most confidence for people to lend money and borrow it.
When all three click into step in sequence after a long absence (characterized by declining or flatlining prices or interest rates), a long bull market in everything recommences and floresces over many succeeding years until the blossom bursts again, and all the petals fall to earth once again.
The period shown above sets the perfect template for examining other periods before and after. That will be helpful, particularly now, I believe, when all the current commentators' comparisons, amateurs' and professionals' alike, seem to be directed at the 1930s and the 'Great Depression'. You can flip a coin to find as many financial and economics experts on one side of the issue or the other--a) it's going to be worse, a lot worse; b) no, it will not be as bad, we're a lot better off now than what was happening then.
The next chart shows you an enlarged portion of the one above, the period from Juy 1937 through December 1942. It will provide the weekly template upon which we want to track current data as they unfold.
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