The Great Depression

  • Benjamin Roth: The Great Depression: A Diary

    Benjamin Roth: The Great Depression: A Diary
    It's all here, times change people don't -the endless govt programs that fail to stimulate the private sector -the ups and downs of the economy, the veterans pension stimulates just as the housing credit did, until of course the money runs out -Roth is a attorney in Youngstown Ohio who kept a diary regarding the economy from 1930 until WW II breaks out, he is objective, candid, and forthright which is more than we get from Washington DC now or then highly recommended

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October 13, 2012

Comments

neil master

Dennis- what did gold and other commodities do in the 70's?

Dennis Elam

Neal

Bob Prechter's group prefers the 1930s as a parallel to now as it was a period of deflation. The 1970s were a period of big inflation with Gerald Ford sporting a WIN button for Whip Inflation Now, which of course he never did, Volcker did that.

The price of gold and oil and silver skyrocketed but as always at the end of the era. Oil did not get to double digits until the second embargo in 1979. Then in 18 months it was 36. Silver did not trade over $25 until the Hunts tried to corner the market and then it shot to $50, the top in fold and silver was quite short lasting only two weeks before it collapsed back.

I believe the 1970s are a valid comparison to now in that we have hugely inflated real estate prices given the low interest rates. In the 1970s interest rates were the opposite, quite high. And in all three eras we had huge swings in stock prices.

As a further parallel the presidential race is very much like Reagan and Carter. Carter was floundering as obama is, the embassy kidnappings are like the murders now, Reagan had been running for president for years just as Romney has as well. Gasoline prices were high then and now.

Trader Kid

To answer your question in the article, yes, particularly as a new investor, historical perspective, especially personal notes from someone experienced and of your level of quality analysis is very much of interest to me.

In terms of parallels, I will first note that no two periods in history are exactly the same, so why can't we have aspects of both those periods today? While you know far more than me about the political parallels, I have to agree with Prechter that the wave count is much more like the Great Depression as the 1970s was mid-pattern whereas we have now completed 5 up and are rolling over, as in the 1920-1930 era.

Dennis Elam

I would agree that we have aspects of both periods. This one is not all deflationary as Bob says, the huge rallies in prices of art, cars both new and collectible, and real estate are different from the 1930s.

and we are rolling over now just as the markets did in 1973.

Trader Kid

While it is true that there is not much "deflation" yet, the potential for it is quite high I believe. Though what ultimately results will depend greatly on central bank policy both directly as well as indirectly via politics, not the least of which is who is put in as chairman if/when parties and presidents change, and whether the social mood "permits" continued printing.

I am not familiar with the particulars of art, cars, etc., but I must respectfully disagree that the markets are rolling over in a manner similar to 1973. I know that you do not claim Elliott Wave expertise, but since you follow Prechter, I am assuming you are familiar with his labeling of the 70s? Do you disagree with his assertion that this is a massive topping process, rather than a sideways bear market, implying the next move will be completely different from the 70s, even though they are superficially similar looking on the chart?

Or maybe we need to ensure we are not just talking at cross purposes: It is my assumption that by comparing to the 70s rather than the 30s, you are expecting a correction of maybe 30-50%, then a resumption of a very long term bull market? My opinion is that a Great Depression like 80-90+% drop is more likely, subject to what is "allowed" by the central bank as noted above. Or is your comparison more to do with how you think it will play out, rather than the magnitude of the correction?

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