Interesting Quotes

If you have read my blog for any length of time, you know I am a student of the present economic turmoil the world finds itself in. There seems to be a general consensus on what caused the present day problems but when it comes to where we are at today, and what the future holds, there are diverse opinions. I tend to listen to the financial experts who have a good handle on history. We learn from history, or we ignore it and suffer the same calamities as those who passed before us. "There is nothing new under the sun" and "everything goes in cycles" are truisms that few would disagree with.

Here are a few bits and pieces that have grabbed my attention.

We meteorologists here at The Daily Reckoning watch the skies like everyone else. But we also read reports from big storms of the past. And what we notice is that this doesn't look like the passing storms of the '80s or '90s. It looks to us like a major change in weather patterns. To be more precise, it looks to us like the Great Storm of the '30s. Do you remember that one, dear reader? No? Well, we don't either, but we've read the histories. It was a doozy. And it began...well...just like this one.In 1930, six months after the initial storm front passed, world output was down about 15%. Today, it is down about 15%, too. Stock markets were only down about 20% in mid-1930. Today, they're down about 35%. And world trade slipped about 15% in the six months following the onset of the Great Crash of '29. Today, it is down 25%. One thing you notice is that like the Great Depression, this downturn is global. A collapse in world trade followed the Crash of '29. It is usually blamed on two protectionist bumblers in Congress - Smoot and Hawley. But in a real depression, trade falls anyway. World commerce needs to readjust to new realities...whatever they are. That's happening again now.The other thing you notice is that this adjustment takes time...and takes the losses much further...much deeper...than anyone expects. The actual bottom in the '30s didn't come until 2 to 3 years after the crash. And it took stocks all over the planet down to about 65% below their peaks. World output eventually fell to only about 2/3rds of what it had been in the late '20s. It took two decades and a major world war before the world was back on its feet.

Will history repeat itself? After today's drop in the TSX of more than 450 points ( a drop of 4.4%) it may be. This little rally has already lasted longer than expected and it was based on nothing.

The above quote is from the newsletter "The Daily Reckoning".

If you do not like 'doom and gloom' stuff, you can stop reading. Maybe it will go away if you ignore it. If it is as bad as predicted by some, I want to go into it prepared, head up, eyes wide open, and not be amazed or surprised. If the authors of this debacle, Timothy Geitner and Ben Bernanke, who have been given the job of fixing it, actually fix it, so much the better. My strategy will hold me in good stead either way.