Party Like It's 1929

The Sovereign Society Offshore A-Letter
Monday, July 27, 2009


“Major stocks hit new highs
for the current rally;
attributed to optimism on business conditions.” –Thursday, July 10th, 1930

When You Strip Away the Hindsight…

"You’ll find that there are some uncanny similarities between 1930 and 2009.

Fears of inflation…a general misunderstanding of the changing economy…and broad markets that didn’t have much of a clue where we were all headed.

Prominent pundits, politicians and economists were all infected by the “Say it ain’t so,” virus that seems so virulent in today’s financial media…

“While the crash only took place six months ago,” said Herbert Hoover in May of 1930, “I am convinced we have now passed through the worst – and with continued unity of effort we shall rapidly recover. There has been no significant bank or industrial failure. That danger, too, is safely behind us.”

Starting to sound like anyone you’ve heard lately?

It goes on and on… “The spring of 1930 marks the end of a period of grave concern...American business is steadily coming back to a normal level of prosperity,” said Julius Barnes in March of 1930. You can find plenty more at newsfrom1930.blogspot.com

Needless to say, many of those quoted above and on the website ended up meeting an unfortunate end. Either ending up dead broke or on the street – via a twelfth-floor office window – the process of natural selection weeded out many of these erroneous predictors.

But not before they talked plenty of American investors into the poorhouse.

The truth is; on a fundamental level we’re quite different from 1930 in a great number of ways. But as far as most of the media – and the advice you’re currently receiving – goes, it’s relatively the same."



-----------------------------------

Dear A-Letter Reader,

Let’s face it; life doesn’t always play out the way you want it to. It doesn’t bend to your beck and call.

It takes its own sweet time and you dance until the music’s finished.

A good example of this is how an overused cliché like “Those who don’t remember history are doomed to repeat it,” usually ends up being true in the end.

I mean, we’ve all heard it a thousand times. And in our everyday lives, we can each find a million reasons why “it’s different this time around.”

But the truth is that many of us are being fooled by random noise and wishful thinking…that life often defies our prior experience and the events of our lifetime…

And if we don’t realize it, we stand to make the same mistakes that cost our grandparents a fortune and half a lifetime of hardship.

Just Read the Headlines

That’s my advice for anyone who doubts what I’m saying; just read the headlines.

You see, we’re currently inside a major transition for the global economy. Recession? Depression? Leave that for the talking heads. Regardless of what they end up calling it, it’s massive. This whole fandango is going down in the history books…

And in terms of the severity of its impact, it’ll be right next to the Great Depression.

But let’s think about this for a second…like I said; we’re currently inside the event. It’s playing out around us, with the history books yet to reach a conclusion.

Were you around for the Cuban missile crisis? You probably knew it was something big – indeed, most of us feared for the very future of the human race – but none of us knew exactly how the event would shape up in the history books.

Which is a funny thing.

I mean, we often take historic accounts at face value. We don’t account for the fact that none of those boys quite knew how the D-day invasion would shape up. We see this grand historic account, with John Wayne movies and Cronkite documentaries, and we imagine the glorious triumph of virtuous heroes over the forces of evil.

But for those boys, nothing was set in stone. The Nazis still could’ve won the war. And history fails to do justice to the terrible fear they must have felt, to the incredible sacrifices they all made in taking up arms for their country.

In other words; we look on history in hindsight…we view it through a different prism than we view our daily life. This single fact hobbles most everyone’s understanding of history.

For if they stripped away that hindsight, they’d see a world none too different from their own. Where the future was still uncertain and the winners were not yet decided.

They’d realize that no idea is ever entirely original; that everything has a track record. Take Quantitative Easing and bank lending – two topics at the very top of our headlines these days…

“D.M. Marvin, economist for Royal Bank of Canada…points out that in spite of low rediscount rate many banks are not lending due to poor balance sheets…Proposes Fed. Reserve banks inject $500M of reserve credit by purchasing government securities. Idea is worth considering, but must be done with care to avoid inflation.”

That little gem is from July 1st, 1930.

When You Strip Away the Hindsight…

You’ll find that there are some uncanny similarities between 1930 and 2009.

Fears of inflation…a general misunderstanding of the changing economy…and broad markets that didn’t have much of a clue where we were all headed.

Prominent pundits, politicians and economists were all infected by the “Say it ain’t so,” virus that seems so virulent in today’s financial media…

“While the crash only took place six months ago,” said Herbert Hoover in May of 1930, “I am convinced we have now passed through the worst – and with continued unity of effort we shall rapidly recover. There has been no significant bank or industrial failure. That danger, too, is safely behind us.”

Starting to sound like anyone you’ve heard lately?

It goes on and on… “The spring of 1930 marks the end of a period of grave concern...American business is steadily coming back to a normal level of prosperity,” said Julius Barnes in March of 1930. You can find plenty more at newsfrom1930.blogspot.com

Needless to say, many of those quoted above and on the website ended up meeting an unfortunate end. Either ending up dead broke or on the street – via a twelfth-floor office window – the process of natural selection weeded out many of these erroneous predictors.

But not before they talked plenty of American investors into the poorhouse.

The truth is; on a fundamental level we’re quite different from 1930 in a great number of ways. But as far as most of the media – and the advice you’re currently receiving – goes, it’s relatively the same.

You’ve got a gaggle of predictors and analysts whose advice was scarcely better than a coin-toss on the best of bubble days. Now, today, we’re seeing an overwhelming demographic shift and a host of fundamental weaknesses resulting from decades of inflationary policy.

Like the predictors of 1930, today’s commentators face an event unlike anything they’ve ever seen. They’re simply outgunned intellectually.

When it’s all over and done, in hindsight, they’ll make good fodder for comedians – perhaps even justifying a website like their brethren from the ‘30’s.

Just don’t wait until then to learn from history.

Yours in Personal Sovereignty,

Matthew Collins, A-Letter Editor

 

Major differences between then a now.


1) Flexible money supply (gold standard is very rigid for increasing money supply)

2) The federal stimulus is much larger this go around...

 

Try checking the figures before making such assumptions. Fractional reserve banking was well in effect and the Fed was able and did grow money supply by pyramiding on top of the gold reserves during the 1920s.

Name one case where printing money and throwing it at the problem has ever worked.
Then read the actual stimulus bill & see how it is being spent.

The only key difference is that instead of a straight forward monetary contraction, the banksters cut off credit to most people while printing massive amounts of fiat.