So we skip recession and go right to depression? Things are certainly different now than in 1929 and the scholars will argue that we will never have another depression because our government learned from depression and thus the changes to interest rates to speed up or slow down the big machine called our economy. There is a saying too "the more things change, the more they stay the same." peace.
Well US long-term interest rates still have a lot of room to go lower and stimulate credit, for sure. Granted though, if long-rates in the USA were near zero, the fed would be in a similar situation to the Japanese. Which is why Bernanke hypothesized the academic notion of dropping money from helicopters. But I also think the cultural differences between Americans and Japanese are important. Asians in general tend to be pretty impervious to keynesian economics to stimulate consumption. Ultimately though, I think the only way a Great Depression scenario could take place is if the Federal Reserve was incapable of pumping liquidity and the only thing that could tie their hands is totally rampant, out-of-control inflation -- their mandated responsibility.
liquidity pumping, implies further weakness in the dollar, in the coming years. The carry trade unwind is pressuring euro currencies in the short term. Notice BOE isn't in the news pumping liquidity as other central banks. Its very favorable for british pound.
'The FED must lower rates and FAST' What will happen to US$ is that scenario, this act alone might trigger the mess that original poster was trying to compare the present times with. In my humble market experience, every time I try to compare some market situation with something in the past, it just does not not not come true. Markets are champions at producing and reacting to new variables nearly everytime they move strongly in either direction. In 2002, who would have predicted the corporate frauds getting exposed at WCOM and Enron would trigger substaintial declines. Lastly, till the time US is blowing up $10B a month in Iraq and illegal immigrants coming from south each day in thousands, it will take something very out of ordinary for US economy to go into recession. One good developing scenario is that Asian econmies like China and India are in top gear, so there is good demand to really really high ticket US items like $100M Boeings, $250K Luxary cars, industrial machines, computer systems and others.
You want to check out how much of China's economy is exports and what percentage of that is for US companies and US markets. China has been trying to stimulate domestic economy and consumption because it is too dependant on the US via export manufacturing. That is why Korea and Japan* have been so hard hit because their exporters are leveraged to the US economy, as are Indian call center and IT workers and Chinese manufacturing workers. *stronger Yen is also a factor with Japaneseexporters
I have refuted "stats" like these so many times, that it is exhausting. Saying things like Are not facts at all, but opinions and predicitions. And wrong ones at that in my opinion. A "fact" is 2+2 = 4.
Ahhhh pfffffffffffft. Get real all you guys harping about inflation, dollar effects, and all these phony concerns about what might happen if there's a rate cut. At the very core root of every problem that's surfaced this summer is higher rates causing tight money. Did you watch Bernanke in Congress? All those guys on the hill -- that's what all their questions and concerns had at the root of it - higher rates. Now look at this mess in world markets. The trend of every single one is now relentlessly down and a clear message is being sent to the US and Bernanke - You and your smarty pants IBs started this subprime BS by giving away houses that we're all stuck with - now do whatever you have to do to fix it - we don't care - people are losing money... . Markets will soar on a rate cut too. Is it a false hope? Who knows - better than doing nothing in a banking and credit panic.
"Markets will soar on a rate cut too. Is it a false hope? Who knows - better than doing nothing in a banking and credit panic." doing nothing or explaining that a steady course of action is necessary till this cycle works itself out is the best course. the problem is worsened by delaying the inevitable pain.
why is it so incumbant upon the fed to cut in order to bail out the market/lenders/hedgies?so we can crush the dollar & force devaluation of our currency which is what the the fed should be concerned about along with inflation. there is always the 100 year storm that our gov`t will not be prepared for & we are over due a for a serious enema & an enormous transfer of wealth.liquidity injections & spontaneous rate cuts,that have wiped out many,many shorts past,have worked in the past.in `07 during that banker panic where JL cleaned up & Morgan came into save our nation from free fall,they beleive they fixed that problem with liquidity injections......then came `29 & the great depression,one that nobody fathomed remotely possible....the epitomy boom & bust.........after the `87 crash the PPT was formed but will one day backfire & will be over whelmed completely with an avalanche.injections are being ignored & only slowing the ineveitable...even if the fed panics & cuts,i believe it will be short lived.i know they have plenty of room to move down but what if they go ignored & met by more selling on a crushed dollar? we have never been as vulnerable as a nation as we are now on so many fronts...debt has brought down every society in modern history....china & japan practically own us & could bury us if they chose.with insultingly high levels of of greed & corruption in our gov`t & selling out the american people is of major concern. history always repeats & in agreement with the thread starter but NOT on fed cuts....let us bleed out if neccassary as it`s about time we learn once again what financial responsability truly is....how can we expect the american people to behave responsibly when our own gov`t is a borrowing junky unable to cover its vig/juice let alone the principle. i`m not in my bunker yet...lol but trading short side only until the 1475/90 level on S & P cach is taken out with conviction. why is `07-`29-`87 so far out of the equation?there`s alot to be said for JL`s quote...."the markets never change because human nature never changes".....sounds much like history repeating itself to me. good trading all....
Keeping this thread on it's 1929 course: I went home flat the indices yesterday. Last night though I was reading a trading board where a guy had a chart of 1929. Two day's before the crash there was a rally that was almost IDENTICAL to yesterday. New lows, a HUGE rally into the close that didn't "fill in" anything prior (I need SPX above 1419 for a minor reversal) and what up until then had been record volume. The chart made such an impression on me that I immediately sold 21's in ES as they were fading. Heck if I'd stayed up, just buying those even's overnight would have been an ok week.......