A Downward Spiral?

The Great Depression was not a sudden total collapse. The stock market turned upward in early 1930, returning to early 1929 levels by April, though still almost 30 percent below the peak of September 1929. Together government and business actually spent more in the first half of 1930 than in the corresponding period of the previous year. But consumers, many of whom had suffered severe losses in the stock market the prior year, cut back their expenditures by ten percent, and a severe drought ravaged the agricultural heartland of the USA beginning in the northern summer of 1930.

In early 1930, credit was ample and available at low rates, but people were reluctant to add new debt by borrowing. By May 1930, auto sales had declined to below the levels of 1928. Prices in general began to decline, but wages held steady in 1930, then began to drop in 1931. Conditions were worst in farming areas where commodity prices plunged, and in mining and logging areas where unemployment was high and there were few other jobs. The decline in the American economy was the motor that pulled down most other countries at first, then internal weaknesses or strengths in each country made conditions worse or better. Frantic attempts to shore up the economies of individual nations through protectionist policies, like the 1930 U.S. Smoot-Hawley Tariff Act and retaliatory tariffs in other countries, helped to strangle global trade. By late in 1930, a steady decline set in which reached bottom by March 1933.

Many of the readers will be thrilled to see a historical connection between the Smoot-Harley Tariff of 1930 and the CAMPAIGN PROMISES of Barack or Hillary...

Maybe the more disturbing view of the Great Depression lies at the feet of Ben Bernake who notes the correlation between the DEBT-DEFLATION of the 1920s and now. It was a cycle where the economy hinged on cheap credit and consumer spending! Unfortunately, many consumers are TAPPED OUT on their credit limit...and will continue to struggle as basic essentials such as gasoline and food tip the scales of BANKRUPTCY. Throw in the DEFLATION seen in housing prices...and the lack-luster dollar, and the writing is on the wall. Should these trends hold true we can anticipate the following:

1. Look for a LARGE layoffs of up to 25%.
2. Drastic cuts in business spending.
3. Non-existent consumer spending.
4. Continued pressure on the housing market.
5. FINANCIAL INSTITUTIONS (which are left standing) will tighten lending standards.
6. Big businesses that proved time and time again that they could not regulate themselves.

Remember the stock market trends moved in a downward cycle for nearly 10 years!

TOD
HIT THE BOOKS AND FIND THE INVESTMENTS THAT REALLY MADE OUT DURING THE GREAT DEPRESSION!

TOD
WILL THE INDIANS WIN THE PENNANT AGAIN?