Deja vu all over again?

Compare these two quotes which are about events 75 years apart but have a disturbingly similar ring to them. The only point I might make with Messrs Carn and Lascelles is about whether the individuals they describe were 'sour and discontented' or merely well informed.

“By the autumn of 2009, the financial world had become overwhelmed by a sense of having lived through something terrible – and of having survived it. Stock markets had rallied strongly, borrowing costs had come down and, crucially, bonuses were back. Even house prices in the UK and US had risen for a couple of months. The world economy, after the biggest fall since the 1930s, had stabilised and started to grow again. Unemployment was still rising, however, and most big economies were seeing falling consumer prices – something not seen in a generation. Amidst rebounding optimism the sour and discontented pointed to vast global imbalances and a future crisis in western government finances.”

Epilogue to “The Credit Crunch Diaries” by Nick Carn and David Lascelles November 2009.

“It all happened with a sort of surrealistic slowness so that it was quite possible to imagine that one had lived through it and survived it when in fact it had only just begun.”

Firsthand account of the onset of the 1930s depression.

Comments

[Philip]

Good find...I remember being struck, when I read Security Analysis by Graham & Dodd, not just at the extent of the crash in 1929 but also at how long the markets took to recover. Then, like now, there was a balance sheet depression caused by overleverage and it was only once that excess of leverage had worked its way through the system that recovery could commence. It's my belief that recovery is hindered by governmental and regulatory can kicking that postpones the reduction of over indebtedness. Given that governments are perhaps the most excessive borrowers of all, I see no reason to believe that this depressing can kicking will cease any time soon. I feel the coalition should have been much more open last year about the extent of the problems of the nation's finances (both government and household). Politically the moment for that has now passed and I am pessimistic about any future government grasping this nettle, though I would love to be wrong of course.

[Terry Smith]

Philip

Like you I would be happy to be wrong. The damage to my ego and reputation as a forecaster if the current government policies turn out well will be far less important than the positive impact on the economy and society. But sadly I doubt that is the case. On the subject of governments providing stimuli, a phrase worth remembering is that the best way to put money in peoples pockets is to leave it there in the first place, not to tax them and redistribute it through the incredibly inefficient mechanism that is most government.