Addison Wiggin of The Daily Reckoning has noticed an amazing similarity between the market action of the last two years and the market’s performance during The Great Depression years of 1934-36. Here’s an excerpt from his piece, which includes some interesting charts…
Ugh… After reaching that double in October 1936, the Dow topped out in March 1937… pulled back… came within about 5% of that top again in August 1937…and then plunged by March 1938 back to where it was three years before.
Liquidity moves markets!Follow the money. Find the profits!
This was the infamous “Depression within the Depression.” As went the stock market, so went the economy. Whatever gains had been goosed by New Deal spending evaporated.
By 1939, Treasury Secretary Henry Morgenthau conceded to Congress: “We are spending more money than we have ever spent before, and it does not work… After eight years of this administration, we have just as much unemployment as when we started… and an enormous debt, to boot.”
We’re not saying history is destined to repeat itself. But the parallels are pretty obvious, and ominous. And there’s a modern-day twist.
“We will not be adding more to the national debt,” declared President Obama on Tuesday, speaking of his proposed 2012 budget, and its projections over the next 10 years.
“It’s loose rhetoric,” counters Robert Bixby, our Tab-drinking acquaintance from the Concord Coalition and I.O.U.S.A. fame. “It’s literally not true.”
See, the president is relying on the notion that spending would come into balance with revenues by 2017 – something he and his aides call “primary balance.” But their idea of spending excludes something very important – interest on the national debt.