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Beware Relief Rallies Update 1: DJIA 7552 the bottom? - Eric Janszen

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  • Beware Relief Rallies Update 1: DJIA 7552 the bottom? - Eric Janszen

    Beware Relief Rallies Update 1: DJIA 7552 the Debt Deflation Bear Market bottom?

    No "bottom" until the debt is gone

    As detailed in Debt Deflation Bear Market Update Part I: 2009 Windup, the Debt Deflation Market that started in 2008 continues in 2009 with rallies driven by positive sentiment invoked by government stimulus spending announcements, such as the rally we have witnessed over the past few days. As we exit the Period of Panic that began in October and enter the Period of False Hope and Uncertainty in 2009, the brave hearted may attempt to trade these rallies, and we will attempt to identify them for subscribers. The false hope is that government spending can pull the economy out of its debt deflation, and that we are wiser than our grandparents and great grandparents were under similar circumstances. But that was then, and this is now.
    MESSAGE READ TO CONGRESS; President Asks Speed on Bills to Create Work in Next Six Months. URGES PUBLIC COOPERATION He Advocates Federal Loans to Farmers--Hits at Speculation as a Cause of Depression. TREASURY LOSS $180,000,000. Caraway Wants Specific Bill. ASKS $150,000,000 TO AID THE IDLE. Most of Message on Depression.

    By RICHARD V. OULAHAN. Special to The New York Times.

    WASHINGTON, Dec. 2, 1930.--Frankly stating that the treasury was confronted with a deficit of $180,000,000 and plainly, indicating that this would prevent any continuance of the 1 per cent reduction in income taxes granted last year, President [Hoover] ...

    The DJIA rallied 8% from 178 on Dec. 1, 1930 to 192 Feb. 16, 1931 on the promise of tax cuts and deficit spending programs, before declining another 76% to 45 on Jun. 27, 1932. Now that is a debt deflation bear market bottom.

    The “lesson” we are supposed to have learned is to not worry about deficits during recession -- or before or after them, for that matter. In the fictional world of mainstream economics, deficits don’t matter when the economy is expanding because we’ll grow our way out of it, you see, and they don’t matter during recessions because fiscal stimulus to prevent recession from turning to depression is paramount, you see. The lesson of 1930 was Hoover’s mistaken balanced budget policy during a recession. That plunged the US into a depression. Or maybe not.
    RATES OF INTEREST, PAY TIED TO JOBS; RATES OF INTEREST, PAY TIED TO JOBS
    February 6, 1947 (New York Times)


    The experience of Sweden, the only country to stabilize its economy successfully during the world economic depression of the thirties, is that fixing interest rates that discourage saving and allowing wage rates to reduce profits may prolong or intensify unemployment, Dr. Bertil Ohlin declared last night.
    Do we have it in us, to learn from Sweden? Then again, can Sweden learn from Sweden?
    New Nordic Outlook: Deeper recession - despite aggressive stimulus policies
    Nov. 25, 2008 (Ad Hoc News)

    The downturn in the Swedish economy is continuing at a rapid pace. Next year GDP will fall by 1.3 per cent, and economic weakness will persist in 2010. The recession will have a growing impact on the labour market. The job market will shrink by nearly 150,000 people altogether, and unemployment will climb to nearly 10 per cent by the end of 2010. The Riksbank will cut its repo rate at least to 1.50 per cent next summer. The government will implement additional fiscal stimulus packages, and by 2010 Sweden's annual surpluses in public sector finances will have turned into a deficit equivalent to 3.5 per cent of GDP.

    Sweden “learned” what all governments “learned,” that a depression driven by debt deflation is like any other recession that can be cured by the cause, credit expansion; politicians who fail to pull out the umbrella of government credit, the bigger the better, to rescue debtors and wave it in the air shouting loudly might as well stand on a church steeple holding a golf club in a thunderstorm so guaranteed is inaction to lead to multiple strikes of fury by unemployed voters.

    Exporting Depression

    One way to cope with recession is to ship it off to distant shores by means of capital controls.
    Attracting Foreign Investment, Sony

    Japan's economic depression was rooted in the interest equalization tax instituted in July 1963 by the President of the United States John F. Kennedy... At the time, the American economy was in recession, resulting in a tremendous outflow of domestic capital. To slow this trend, Kennedy took strong measures -- a 16.5% interest equalization tax on all capital leaving the U.S. While this move did indeed decrease the outward flow of American capital, it also incited panic in world markets. Japan was no exception. In 1965, Japan felt the full effects of the tax -- the securities market slumped into the worst depression in its history. When the Tokyo Stock Exchange average dropped to 1,020 yen, many thought that the Japanese economy would collapse.
    But that won't work again. The US was a net creditor and an ample market for exports. Now we are neither.

    The Bubble that Broke the World, again?

    A facet of the delusion that once again engulfed us is explained in the section of Garret Garrett's 1932 classic The Bubble that Broke the World above. I bought an original copy of the book in 1998 from the Victor Hugo used book store on Newbury Street in Boston. It has been a constant guide ever since. The facts of the current global credit crash vary little from his description except in the speed and fury of the current instance. If you have not read it yet, I recommend it highly.

    Global Crash

    Tearing a page from the last Great Depression hymn book, world leaders at the G20 summit last week agreed to not repeat the errors of the past by erecting trade barriers and repeating of the beggar thy neighbor policies of the 1930s that lengthened and deepened the depression. But the modern global economy isn't giving them a chance. Who needs tariffs to slow trade when we have a real-time global credit network crash and demand collapse doing it for us?
    LAYUPS OF SHIPS REFLECT DETERIORATION IN WORLD’S CONTAINER TRADE
    November 24, 2008 (PETER T. LEACH – Shipping Digest)

    If current trends continue, Ron Widdows says, he’ll soon be able to see much of the world’s container ship fleet from his office window in Singapore. The chief executive of Neptune Orient Lines is joking, but it’s gallows humor — the growing number of laid-up ships is a sign of hard times that are likely to become worse.

    The container shipping industry is being hit by a synchronized global economic shock more severe than any recession since the advent of containerization. The impact is only beginning to be felt. It’s likely to change the face of the industry by forcing some lines out of business, forcing others to merge or sell off ships and cause layups of hundreds of ships in the next year or two.

    Until the end of October, the slowdown appeared to be a cyclical downturn that container lines could manage the way they have managed previous slumps. But then consumers in the U.S. and Europe, seeing what was happening in the financial markets, closed their wallets and purses. With businesses hit by weak demand and tight credit, container lines saw their cargo bookings plummet.
    No, this global debt deflation is not like the last. It is much more swift, and that carries with it its own unique risks.

    Exit Fantasy

    Next year the fiction will be dispelled that governments can stop debt deflation by means that do not either produce mass unemployment or horrific inflation. As they try and repeatedly fail to meet expectations the Period of False Hope and Uncertainty will give way to the Era of Total Despair, and then we will see a bottom. Lost and wandering the ideological landscape with all of the old beliefs washed out, men go mad and grasp for any explanation but the truth -- that the debt must be deflated before recovery can begin -- and anything can happen. Watch Kudlow’s show and you’ll see what I mean.

    Economic eras may share similarities but not two are alike. What worked in the last debt deflation will not work now, and what did not work then will most certainly not work now. In debt deflation governments are either fighting the last economic war or some ancient war fought under conditions that will never recur, but all the same the root causes are alike: the economic delusions produced by excess credit.

    The US cannot export its way out of debt as Japan did from 1990 until recently – and what will happen to Japan in this recession with its public debt now 193% of GDP? We hear that Asia will lend no more, so the US cannot borrow its way out of debt.

    At least iTulip readers can resign ourselves to our fate, and the sooner the better. There are consequences to debt. How shall we take it, by inflation or deflation? I say inflation is inevitable, so let's get it over with.

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    Last edited by FRED; 02-23-09, 05:23 PM.

  • #2
    Re: Beware Relief Rallies Update 1: DJIA 7552 the bottom? - Eric Janszen

    Originally posted by ej View Post
    In 2008 the sky darkened and it came down on him like a single, hulking fist, hitting once full in the face. Smack! He staggered backwards, then again and again it came punching -- ribs, stomach, wind knocked out. Then with open hand, slapping, then again tight and angry, bashing, jabbing.

    At first he stood his ground, put up his arms, took two swings in meek defense against impossible force, then more punches, vengeful, pummeling, then on the ground balled up, and after a single, deep moan took his savage beating for the duration with honor in silence.

    No one shouted, Get up! All around him the others stood by, faces blank, staring, or fell with him, one by one, thuds and scuffles, an odd whimper or cry. On it went until all the fight was out of it.

    He lay still and wounded. An hour later he knew it was done. He gathered his wits and seeing nothing broken but cuts and bruises pulled himself up and began the long walk home.

    It was Debt and he was America. He had it coming. But now it was over. The sun warmed his back and he felt for the first time in so many years like his own true self again and from then on everything would be alright.
    First, I don't get the "In the year 2012" that precedes your quoted work;
    otherwise, I think you are being a bit optimitistic here, unless you put in another character "the US political system" whose left arm is the Democrats, whose right arm is the Republicans, and whose head is empty. This second character needs not to be badly beaten, but killed.
    Jim 69 y/o

    "...Texans...the lowest form of white man there is." Robert Duvall, as Al Sieber, in "Geronimo." (see "Location" for examples.)

    Dedicated to the idea that all people deserve a chance for a healthy productive life. B&M Gates Fdn.

    Good judgement comes from experience; experience comes from bad judgement. Unknown.

    Comment


    • #3
      Re: Beware Relief Rallies Update 1: DJIA 7552 the bottom? - Eric Janszen

      One of your best, Eric.
      Thanks, pal

      Comment


      • #4
        Re: Beware Relief Rallies Update 1: DJIA 7552 the bottom? - Eric Janszen

        Originally posted by EJ View Post
        In the year 2012

        In 2008 the sky darkened and it came down on him like a single, hulking fist, hitting once full in the face. Smack! He staggered backwards, then again and again it came punching -- ribs, stomach, wind knocked out. Then with open hand, slapping, then again tight and angry, bashing, jabbing.

        At first he stood his ground, put up his arms, took two swings in meek defense against impossible force, then more punches, vengeful, pummeling, then on the ground balled up, and after a single, deep moan took his savage beating for the duration with honor in silence.

        No one shouted, Get up! All around him the others stood by, faces blank, staring, or fell with him, one by one, thuds and scuffles, an odd whimper or cry. On it went until all the fight was out of it.

        He lay still and wounded. An hour later he knew it was done. He gathered his wits and seeing nothing broken but cuts and bruises pulled himself up and began the long walk home.

        It was Debt and he was America. He had it coming. But now it was over. The sun warmed his back and he felt for the first time in so many years like his own true self again and from then on everything would be alright.
        hmmmmm. a peculiar mix of history, analysis, doomerism & literature. not sure what to make of it but... combined with rajiv's martin weiss post makes me want to go to the bank and take out all of my money. :eek:

        Comment


        • #5
          Re: Beware Relief Rallies Update 1: DJIA 7552 the bottom? - Eric Janszen

          Originally posted by EJ View Post

          Exporting Depression

          One way to cope with recession is to ship it off to distant shores by means of capital controls.
          Attracting Foreign Investment, Sony

          Japan's economic depression was rooted in the interest equalization tax instituted in July 1963 by the President of the United States John F. Kennedy... At the time, the American economy was in recession, resulting in a tremendous outflow of domestic capital. To slow this trend, Kennedy took strong measures -- a 16.5% interest equalization tax on all capital leaving the U.S. While this move did indeed decrease the outward flow of American capital, it also incited panic in world markets. Japan was no exception. In 1965, Japan felt the full effects of the tax -- the securities market slumped into the worst depression in its history. When the Tokyo Stock Exchange average dropped to 1,020 yen, many thought that the Japanese economy would collapse.
          But that won't work again. The US was a net creditor and an ample market for exports. Now we are neither.
          btw, this is on sony's corp. web site! not in any history book i've read. where do you guys get this stuff???

          Comment


          • #6
            Re: Beware Relief Rallies Update 1: DJIA 7552 the bottom? - Eric Janszen

            EJ
            Good Post. It is always good to look at our past to get an idea of how the future can turn out. Particularly liked your comments -
            Originally posted by EJ
            "The false hope is that government spending can pull the economy out of its debt deflation, and that we are wiser than our grandparents and great grandparents were under similar circumstances"
            . That we are smarter than our forefathers - that is just fantasy we are hearing on TV.

            Comment


            • #7
              Re: Beware Relief Rallies Update 1: DJIA 7552 the bottom? - Eric Janszen

              EJ
              They put the price of a Big Mac up today.........Ha there their deflation hopes blown!
              Mike

              Comment


              • #8
                Re: Beware Relief Rallies Update 1: DJIA 7552 the bottom? - Eric Janszen

                For anyone who is interested in reading Garet Garrett's classic work mentioned by EJ, here's a link to the entire online book, courtesy of the Mises folks:

                http://www.mises.org/books/bubbleworld.pdf

                Comment


                • #9
                  Re: Beware Relief Rallies Update 1: DJIA 7552 the bottom? - Eric Janszen

                  Some say the 2012 is not going to be good, as the baby boomers retire and there children cant support them..and that was before USA took on $7.7 trillion dollars of debt in 6 months.. http://www.thegreatbustahead.com/
                  Also DOW 26000 may be a bit of a reach...Dan Arnold didnt really take into account $65 trillion of CDS.. so I guess its worse than even he thought !
                  Attached Files
                  Last edited by FRED; 03-19-09, 12:21 AM.

                  Comment


                  • #10
                    Re: "In the Year 2012"

                    I've never been a huge fan of Kris Kristofferson as an entertainer, but he is perhaps one of the better song writers of my time. A new title perhaps: "He's America" or "He's The Dollar"?





                    He's A Pilgrim (Lyrics)



                    See him wasted on the sidewalk in his jacket and his jeans
                    Wearing yesterdays misfortune like a smile
                    Once he had a future full of money, love and dreams
                    Which he'd spend like they were going out of style

                    And he keeps right on a changin' for the better or the worse
                    Searchin' for a shrine he has never found
                    Never known' if believin' is a blessin' or a curse
                    Or if the going up was worth the comin' down

                    (Chorus)

                    He's a poet, he's a picker, he's a prophet, he's a pusher
                    He's a pligrim and a preacher and a problem when he's stoned
                    He's a walking contradiction, plartly truth and partly fiction
                    Taking every wrong direction on his lonley way back home

                    He has tasted good and evil, in your bedrooms and your bars
                    And he's traded-in tomorrow for today
                    Running from his devils Lord, reachin' for the stars
                    Loosin' all his love along the way

                    But if this world keeps right on turnin' for the better or the worst
                    And all he ever gets is older and around
                    From the rockin' of the cradle to the rollin' of the hearse
                    The goin' up was worth the comin' down

                    (chorus)

                    He's a poet, he's a picker, he's a prophet, he's a pusher
                    He a pilgrim and a preacher and a problem when he's stoned
                    He's a walking contradiction, partly truth and partly fiction
                    Taking every wrong direction on his lonley way back home

                    There's been a lot of wrong directions on that lonley way back home.

                    Comment


                    • #11
                      Re: "In the Year 2012"

                      Originally posted by strittmatter View Post
                      I've never been a huge fan of Kris Kristofferson as an entertainer, but he is perhaps one of the better song writers of my time. A new title perhaps: "He's America" or "He's The Dollar"?





                      He's A Pilgrim (Lyrics)



                      See him wasted on the sidewalk in his jacket and his jeans
                      Wearing yesterdays misfortune like a smile
                      Once he had a future full of money, love and dreams
                      Which he'd spend like they were going out of style

                      And he keeps right on a changin' for the better or the worse
                      Searchin' for a shrine he has never found
                      Never known' if believin' is a blessin' or a curse
                      Or if the going up was worth the comin' down

                      (Chorus)

                      He's a poet, he's a picker, he's a prophet, he's a pusher
                      He's a pligrim and a preacher and a problem when he's stoned
                      He's a walking contradiction, plartly truth and partly fiction
                      Taking every wrong direction on his lonley way back home

                      He has tasted good and evil, in your bedrooms and your bars
                      And he's traded-in tomorrow for today
                      Running from his devils Lord, reachin' for the stars
                      Loosin' all his love along the way

                      But if this world keeps right on turnin' for the better or the worst
                      And all he ever gets is older and around
                      From the rockin' of the cradle to the rollin' of the hearse
                      The goin' up was worth the comin' down

                      (chorus)

                      He's a poet, he's a picker, he's a prophet, he's a pusher
                      He a pilgrim and a preacher and a problem when he's stoned
                      He's a walking contradiction, partly truth and partly fiction
                      Taking every wrong direction on his lonley way back home

                      There's been a lot of wrong directions on that lonley way back home.
                      Here's KK singing Pilgrim on YouTube.



                      Comment


                      • #12
                        Re: "In the Year 2012"

                        Originally posted by Verrocchio View Post
                        Here's KK singing Pilgrim on YouTube.
                        is this a joke? kris kristofferson? bwah ha ha ha!

                        Comment


                        • #13
                          Re: "In the Year 2012"

                          Originally posted by metalman View Post
                          is this a joke? kris kristofferson? bwah ha ha ha!
                          Again, stick with the lyrics.

                          Comment


                          • #14
                            Re: Beware Relief Rallies Update 1: DJIA 7552 the bottom? - Eric Janszen

                            Metalman, "Top Investors" is a feature which appears on the menu bar above once one is logged in. You have a portfolio there.

                            Comment


                            • #15
                              Re: "In the Year 2012"

                              I've never been a huge fan of John Parr as an entertainer, but he is perhaps one of the finest song writers of my time.

                              Comment

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