Six weeks ago, i asked this question in a post, Are we facing another Great Depression?
Today the Wall Street Journal, asked if market history will repeat itself looking at 2008 and 1931.
“””””Over the two weeks ended Nov. 20, 2008, the Dow Jones Industrial Average fell 16%. Over the two weeks ended Nov. 20, 1931, the Dow fell 16%.
If you think that is scary, consider this: In the final five weeks of 1931, the Dow fell 20% further. Then it went on to lose yet another 47% before it finally hit rock-bottom on July 8, 1932.””””
“”””””It is vital to realize that markets are never under some obligation to stop falling merely because they have already fallen by an ungodly amount. It also is vital to explore how bad the worst-case scenario can get and to think about how you would respond if it comes to pass.””””
When the Dow finally stopped going down, in July 1932, it had lost 88% in 36 months. At that point, only five of the roughly 800 companies that still survived on the New York Stock Exchange had lost less than two-thirds of their value from their peak in 1929.
In 1931, one out of every six Americans was unemployed; today, one in 16 is out of work.
And I think that is will determine how bad the economy gets, whether the recession turns into to a depression and how long before there is a recovery.
For the past several week, jobless claims have been over 500,000 per week, higher than estimates (last week 540,000), the highest in 16 years.
At that rate its over 2,000,000 people a month and over 6,000,000 people a quarter.
Here’s the wild card.
The automakers.
There is a train of thought that almost 1 in 10 of all US jobs are directly or indirectly effected by the US auto industry.
If the big three go bye-bye, the 500,000 a week job loss may hit 1,000,000 or more.
If the unemployment rate gets above 15%, we are going to find ourselves looking back to 2008 as the good old days.
UPDATE
Today President Elect Obama, said:
“The evidence is growing the country is “facing an economic crisis of historic proportions.” He noted turmoil on Wall Street, a decrease in new home purchases, growing jobless claims and the menacing problem of deflation.””
Makes you wonder where we’ll be in a couple months… and even scarier, in a couple years. Regardless, I’m still wearing good ‘ol Red, White and Blue.
Hopefully we unify as a nation and get through this together.
Michael,
thanks for cheering up my saturday morning.
larry
sometimes charity begins at home. The US needs to keep all its money in the US for 5-10 years.
Things go up and down with time – that is called change.
If people are not ready to face the change then it is a Great Depression.
The other day I watched on TV the CEO’s of Ford, GM and Chrysler speaking to the Representatives in Congress and one of the Congress Men said to them why did they come to ask the Congress for bail out money when you still do not live in reality – the CEO’s still have their Private Jets and all the Luxury and yet they need more money which comes to me across that the CEO’s of those Company’s have not changed their mindset – they are still narrow minded and with their mindset they are dragging the whole Company down .
They SHOULD create cars that are environmentally friendly and save money to the customer – talk about global warming.
If any of the car makers read this post contact me and I will show you how to balance YOUR budget in Your Company and what your Company needs to change in the vehicle production to save Your Company and the Industry.
Times will be tough and different people will feel it in different ways and to different levels of severity.
It was 1954 when the market got back to 1929 levels. That was 25 years to recover to all time highs.
If 2008 is 1929 then 2033 is 1954.
Here’s the long term chart of the Dow.
http://www.stockcharts.com/charts/historical/images/djia1900s.png
If you are into technical analysis you will see that MIGHT be bouncing off a low here. So let’s pray that this is the bottom. If not then support looks to be down at maybe 3500. Below that 1000. Yes. 1000.
Have a great day.
This will not be a repeat of the Depression.
The reason? The Internet.
In fact, the crash happening now was long overdue. Home sales started to slide in 2005, but the stock market kept rising. It was like we were beginning to live in a false reality. Furthermore, traditional real estate was overpriced and cyber real estate was, and still is, underpriced.
We are currently going through a major shift of value and power. This is far different than what happened in the 1930’s. The good news for us is that, after the dust settles, those having anything to do with the Internet will find themselves at the top of the food chain.
I agree with all that David but I grabbed this explanation of a depression from About.com. I think we can have A depression but not THE Depression. Monetary policy is different and the economy is global.
From About.com
So how can we tell the difference between a recession and a depression? A good rule of thumb for determining the difference between a recession and a depression is to look at the changes in GNP. A depression is any economic downturn where real GDP declines by more than 10 percent. A recession is an economic downturn that is less severe.
By this yardstick, the last depression in the United States was from May 1937 to June 1938, where real GDP declined by 18.2 percent. If we use this method then the Great Depression of the 1930s can be seen as two separate events: an incredibly severe depression lasting from August 1929 to March 1933 where real GDP declined by almost 33 percent, a period of recovery, then another less severe depression of 1937-38. The United States hasn’t had anything even close to a depression in the post-war period. The worst recession in the last 60 years was from November 1973 to March 1975, where real GDP fell by 4.9 percent. Countries such as Finland and Indonesia have suffered depressions in recent memory using this definition.
Yes, but all of these analysts are leaving out the most important part of the comparison – The Internet.
During the Depression, FDR had to fix the same old same old. In fact, there was no other form of economic stimuli until, ironically, World War II.
In the 1930’s there was no good economic news period, but watch what happens during this holiday season. Brick and mortar is going to take a bath, but Internet sales will continue to rise. This is the all important X Factor that was not happening in the 1930s.
I’ve witnessed it first hand as our sites like PalmSprings.com started to gobble up local revenue that had been going to traditonal businesses for over seventy-five years. It wasn’t hard to see that an economic revolution was going on – and any type of a revolution is messy.
We won’t see a depression this time around, due in no small part to the monumental differences between how the federal government is handling the economy this time verses last time.
Back in the 30’s, the feds; not really sure what to do; let the credit markets seize up. This “hands-off” approach was realized in later years to have been a mistake…one which today’s gov is obviously not repeating.
Tough times for many? You bet.
A depression? Ain’t gonna happen.
David’s quote
“those having anything to do with the Internet will find themselves at the top of the food chain”
Hopefully, I will not be consumed by the food chain.
🙂
I agree the Internet is the place to be, especially if more people are staying home because of unemployment or chose to stay home instead of going out to dinner or go on vacation etc.
However, expect less advertisers, lower ad rates and less click throughs.
I would think 25% less advertisers with 25% lower advertising rates and 25% less click throughs.
I’m no economist or mathematician but doesn’t that add up to 75% less revenue?
So, sure, the Internet is the place to be but our revenue will be MUCH lower in 2009.
No?
Neil Cavuto yesterday reported on how the new $200 Blackberry has lines around the corner and is selling out all over the country….he alluded to the fact that a depression is lines for bread not a phone that is just a little different.
Thanks Mike!
With todays spoiled life styles, a great depression will be people canceling their high speed Internet, cable, and cell plans. It will be life without luxuries, not life without food.
I agree with D. Castello. The economy is global now compared to 1929. As time moves forward, the rest of the world will not be so tied to American economic swings, and American investment itself will become more diversified having tapped into more stable pockets of foreign growth (which is where the majority of the action will be in the next decade).
The mortgage crisis was a uniquely American catastrophe (really tragic in the extent of needless damage) that has somewhat artificially depressed the larger market. America is struggling through a transformation as we continue to lose our manufacturing base. However, the U.S. remains innovative and will reinvent itself over the course of the next 10-20 years finding new ways to be competitive. Some of this will depend on our ability to position ourselves to serve these new emerging foreign markets (in an ironic turning of the tables).
I believe there will be many more plant closings, bankruptcies, and job loss before the USA regains its footing. More like 3-5 years before things level out and reset. Two things are going to be hugely important: 1. MUCH better regulation in the allocation of credit, 2. More people willing to get an education and to work for less. Americans are so far over-extended living on credit, it’s insane.
We need a cultural shift that places high value on savings and personal discipline. Anyone else think so? The entitlement mentality that is growing in this country is a ticking time bomb.
I think that things are totally different. Take employment for example. In the 1900s a person tended to have one profession their whole life – now the norm is more like 4 profession changes. At that time the automobile was just entering its glory era and a lot of professions became obsolete.
Now take a look at the automotive industry problems – the real problem isn’t that GM, Ford et al have screwed up, it is that the automotive industry is on the way out. Period.
The robotics era is upon us. Start getting ready for a complete change in lifestyle. Start getting ready for way less employment and far more leisure time. Prepare for longer lives and better health.
Robotics will be a far bigger industry than the automobile ever dreamed of being. The robotics era will last longer and dramatically change more lives.
The actual moment when I realized that the robot era is here/now was when I saw the Boston Dynamics’ “BigDog” video. I want one and I want a whole bunch of other robots as well. I want a gardener robot for a start to help with my food production. I’ll take a replicator too, like the “reprap” – I’ll buy one (and only one).
The internet is simply the apogee of the communications industry. All the internet really is is a reliable worldwide communications network. Combine that with GPS technology. Add robotics and then try and imagine why we would possibly need automobiles as much as we now do or maybe we don’t even need autos at all.
Replicators will be the end of pretty much every single manufacturing industry that currently exists. Robots will mean the end of employment in labor-intensive industries.
Everything will change and sure the “credit crunch” is causing some problems with the stock market but the real problem for almost every company is how they are going to deal with the elimination of any reason for their existence in the next two years as the robotics industry explodes and affects every single aspect of our life.
Any comparisons between yesterday’s stock market crashes and unemployment rates are completely invalid. The events and trends of the coming years have absolutely nothing to do with any events or trends of past years.
We are gonna see a global collapse of the worlds monetary systems this coming depression…which will ultimately lead to a one world monetary system.
The great depression in the 30’s is nothing compared to the one we will see soon.
I think precious metals are about the only thing worth investing in right now and even those may not be worth much when this depression really hits.
Its all about stocking up on the essentials for life….food/water and the such.
@ Greg B – Interesting take on things. I agree that automation (which is what American automakers need to be competitive) will reduce the need for human workers. A future problem is that human beings become ever-growing liabilities to one another unless each person makes an effort to become self-sufficient and to contribute to society. The entitlement mentality leads to widespread apathy and a belief that “government” will take care of you, and that “big business” somehow owes the masses something. In the end, each person has to advance their own position through education, honest work, responsible decision-making, and a responsible lifestyle.
I’ll respectfully disagree with you on the credit crunch causing “some problems”. Living on credit is a symptom of a society in decline. A relevant example: Rooms-To-Go just ran a TV ad that you can buy a living room suite with no money down and no payments until July 2010. That is emblematic of the immediate gratification society we live in. If I can’t offer a down payment, and cannot afford to make a monthly payment, then I have no business whatsoever buying furniture. Guess what happens when you are late with your Room-To-Go payment after July 2010? House of cards on the edge of a cliff.
Same with the mortgage crisis. Millions of defaulted mortgages. People living above their means with an immediate gratification mentality. And who’s paying for their irresponsibility? Who’s paying for the corporate greed and lack of accountability that allowed this nuclear meltdown?
It takes law and intelligent, far-reaching regulation to save the masses from their own weaknesses. We now live in a society in which we will have to legislate common sense. Giving out easy, readily available credit to non-established adults is a recipe for economic destruction. Standards of achievement and a proven degree of financial stability must become the new norm.
http://www.survivalblog.com/ It’s what you should be reading regarding this subject.
Its a very worrying time just now with Christmas round the corner and not many people having money.
I dont want to make things worse but 2009 is going to be REALLY BAD!
Dont ask me how I know but trust me we aint see nothing yet!
Regards,
Robbie
I read this article yesterday
http://www.politico.com/news/stories/1108/15883.html
about Obama’s plan to create 2.5million jobs by hiring people to fix bridges, repair roads and schools and the like. Sounds like the new “new deal” where millions of people are hired for government jobs like FDR did in the Great Depression.
I actually think this could be a great idea. Spend tax payer money to hire tax payers to fix public works projects for the taxpayers.
So, I couldn’t resist investing a few bucks to hand reg these domains. I think it’s money wisely invested.
GovernmentEmployers.com
GovernmentEmploymentAgencies.com
GovernmentEmploymentAgency.com
GovernmentJobFairs.com
GovernmentJobForum.com
JobRetrainingCenter.com
JobRetrainingCenters.com
JobRetrainingProgram.com
JobRetrainingPrograms.com
JobRetrainingSeminar.com
JobRetrainingSeminars.com
RetrainingCenters.com
RetrainingProgram.com
RetrainingPrograms.com
RetrainingSeminar.com
RetrainingSeminars.com
I think job retraining will be huge in the very near future.
Anyone else get the sense that the government as an employer is going to get a lot bigger?
Greg
“””Any comparisons between yesterday’s stock market crashes and unemployment rates are completely invalid.””
“”” The events and trends of the coming years have absolutely nothing to do with any events or trends of past years.””
You got to be kidding me.
Ever hear of the expressions “learn from your mistakes”, or “history always repeats itself”
You can discount or try to distinguish today facts and circumstances from past ones but to say there is “completely nothing” that happened before that has a bearing on today is foolish
i have canceled 50% of my domains (given many of them were pretty crappy, attributed to when i started out) and will be canceling another 25% -35% in the next few weeks. We screwed and when business owner cant pay his employees, he is not worrying about getting best domains. He will settle for shitty ones.
You guys need to relax before you start sucking on a tailpipe.
No should discount the past, but to draw too many analogies between now and the Depression is incorrect.
Simply put, things happen much faster now. And that works both ways.
David, that is exactly how I feel. Everywhere you look the evidence is in favor of us (people) having already entered a logarithmic stage of development.
When only the first few of the initial points on a logarithmic graphs are considered it does look like a straight line or at worst a gentle curve. At some point it becomes apparent that we are not in any gentle curve but approaching the point of rapid changes.
I’m no expert, but I’ve read enough about complex systems analysis and emergent behavior to accept that in a system when aspects of the system are experiencing the wild growth stages of their development then emergent behaviors will appear.
As one example, if anything about robot development even approaches the sophistication of the modern automobile it may well be an accepted mark of failure if an unemployment rate of less than 99% is “achieved” by any measurable entity.
By which I mean that if more than 1% of the population isn’t working then its time to elect another government (or threaten the programmers, it’s almost to that point now anyway).
If that future scenario seems in any way plausible then comparisons of unemployment rates are impossible to use as a basis for making societal predictions. That “emergent behavior” of a 180 degree change in our view of what is positive and what is negative as concerns unemployment rates would be just one of what promise to be many emergent behaviors that may well be already upon us, even though we don’t quite yet realize it.
Using the North American football analogy and using the metaphor of ‘ entering a stage of a strategy where “broken field running” is THE dominant characteristic of the successful’ and then applying that metaphor to completely unpredictable emergent behaviors is the only chance of our success, no matter the field – domaining, economics or societal development.
The first thing I imagine happening as concerns domainers given the above metaphor is that we become accepted to the new “vanity” TLDs. However, given that we have wireless, digital radios available for about 500$(soon to be 5$ once the principles of mass production begin to take effect) and mesh network technology for nothing – then numerous networks will co-exist in any given network. Probably the only things that won’t change are spoken names.
For example “Portland” the city will likely always be (commonly) known by that name. At least that is more likely than to be known to people by its IPv6 DNS address. It makes total sense that there will be a “.portland” TLD. Since the wireless devices have a finite range it is completely possible and likely that there will be more than one “.portland”. ICANN won’t have anything whatsoever to do with these new wTLDs (wireless TLDs) – the municipality or the state (or the neighborhood for that matter) will police those situations. I haven’t really figured out in which way(s) this will affect the “.com”s and the “.nets” but the one thing I’m sure of is that geographical names will be increasingly more important as concerns domain names.
My point being though that unexpected things are going to happen, are happening, even now. Deliberating as to long term plans right now is a waste of time. The concept of “broken field running” says to take advantage of the assets that you have now and be ready to change direction at any instant.
The enabling change that is upon us right now is that of robotics. We are on the cusp of accepting an economy, and in fact a standard of living, where unemployment rates are rated as “the higher the better”. We aren’t in the “ramp up” stage of robotics anymore, we are in the steep growth stage – there may well be a plateau at some point but that is coming quick.
Imagine mobile robots capable of making other robots including replicators – basically we are there and once automotive mass production methods are applied we will “be there”.
I haven’t even mentioned nanobots, the theories of genetic behavior from Lamarck having suddenly become relevant again, etc but if I were looking for a perfect point in time to transition to an indolent society I would pick now.
If I were looking for our perfect population that would best be able to handle that transition – that population could change their properties that make up their self-esteemby valuing those of the “indolent lifestyle” rather than the (somewhat) currently positive emphasis of a “productive” lifestyle – I would look at the population of the USA.
Meaning no disrespect, it isn’t going to an easy transition to make – I’d imagine that there will be a terrible psychic toll to be paid in the process. Yet the USA can lead the rest of the world into this new era – which I see at the beginning as a very “garden of Eden” type experience which has the potential to go another way once the realizations of the realities of life extension are upon us.
Regardless when you look at the graph and try to predict based on history you will always be wrong if you only consider the current and prior points. When we consider the last 200,000 years of “points” it becomes almost a for sure thing that the graph of our development (and the events which accompany it) are logarithmic.
@MHB so, no I am not “kidding you” and indeed I have heard of those expressions but it is my belief that we are in the stages where rapid changes are the norm and that nothing in the past can prepare us to deal with or predict the emergent behaviors that will be and are now upon us – the best bet is to learn to adapt quickly and to always understand that we are past the point where there will be a long period of anything.
The rate of these fluctuations in the future may be the problem but “hunkering down for the duration” is as far from a solution as there is likely to be.
Which is a long way of explaining why what David said is how I feel. His reasons may be somewhat or completely different than mine but he still said what I feel.
I think we will have wars way before getting this optimistic as Dave and Michael are. Once countries start running low on food, the other ones will take aim at them. USA is pretty solid, but chaos is what i expect. We all nice till our essentials are threatened, and that’s what precisely is happening in the world.
Greg
Sure things move faster now and there are differences, however using your logic there will be no more economic cycles, and unemployment hitting 15% won’t matter.
I Don’t buy it.
When people don’t have money to pay their bills, or feed their family, the internet is not going to save everyone from the fall out neither will “mobile robots” or “nanobots”.
Until you can find work for tens of millions of people formerly in the financial and auto section, just to name two industries, there will not be enough people with money to support businesses
Art:
I’m not simply being optimistic. We’re going through an economical rebirth and, as any mother will tell you, a birth is not painless.
For us, the dotCom crash of 2000 may have been our saving grace. The dotCom crash of 2000 scared away the stock market and its investors from most Internet businesses and allowed the industry to grow in a much more natural and practical way.
Because of this, most Internet businesses are not public and, therefore, not dependent on the stock market for capitalization.
I believe it is the multitude of these non-brick & mortar, financially independent Internet businesses (almost all not on Forbes or WSJ’s radar) that will help maintain the commerce of the early 21st century and hold a line that did not exist in 1929.
You might also want to check this article out
http://www.time.com/time/business/article/0,8599,1861115,00.html
Mike:
Actually, I read it earlier today. No doubt that unemployment will rise for a while, but did you see the interveiw with the Honda employees in Ohio who suggested that the US automakers shouldn’t be bailed out because of their own stupidty? Could you imagine that scenario in 1929?
Nope, today’s economy is a whole new ballgame with a different playbook.
The banks/investment houses who invested in subprime mortgages and the automakers who made their money building SUV’s now have to pay the piper and have suckerpunched the US economy. It will hurt like hell, but there is a big difference between surviving a suckerpunch (2008) and a TKO (1929).
Dave, i have no question about difference of now and 1929, my main concern is not just bail out of auto industry or lack of it. It is the financial health of US, that has been playing this risky games, of “how much credit can i get”. Sadly, as we can see now, those banks which are majority, got way too much credit. It is very likely we will see demise of Citi bank tomorrow. I would like to think we will recover soon enough, but problem is, this is TKO that has already been admitted by Paulson and number of others, the questions is how quickly we can get up., and if we can. Sucker punch (which i dont think was much of a sucker, it was seen by many coming), is a recession. We are far beyond just a normal recession. I am not trying to be all gloom and doom, since i would be the first to say i want good economy, since i run a business that depended on a good economy, and i cant expand if i dont have good economy. I am just saying that right now, its only bad news, and until i see some good news, or some improvement in my business. Sadly, sub prime and SUVs, is only a first step, which is not that relevant, relevant step now is financial instruments sucj as CDOs, and other crazy financial derivatives that allowed gambling of Wall street.
Well
I happen to believe that we are in real trouble. Forget the great depression. This will far surpass it. We were no where near the debt we have now,and a war helped us out of it in 1942, In this case, a war we are already in, helped us into more debt. We have an abundant spply of windbags here in the states who can sell coffee and hamburgers, but….that is by-product sales. When was the last time you welded something or caught your dinner? Most folks have lost the art of art. The truth is, sweat is the only pure form of work. Forget unions, day trading, and cable tv. We need to get busy. Everyone. Get off our butts and start are real effort to take care of ourselves. Obama means well, but he is still just a politician. He cannot fix this problem. He cannot fix our problem by going to camp david to impress his kids and relax. He’s better than Bush, but still a politician. The funny thing about most politicians is that they have made their money. They really dont care about anything but keeping their jobs. They are good to go. It affects their ability to lead. It really all boils down to sweat. Did you really earn it? Free rides are coming to an end. That works for me. If you know how to work, there will always be work available. Those that sweat will always have food. People that do nothing, produce nothing, or create nothing new, will feel the pinch the worst. Like it or not, crap times are coming. Face it. Will we survive, yes. will it be fun, depends, will it last forever, no. But I will sugggest learning to gro your own food and getting a job that makes you sweat. This commentary is very opinionated but our country is overwhelmed with indecision so I thought I would give it to you straight in my way of thinking. Good Luck