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Why Look At The Depression?

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January 28, 2008 – Comments (7)

Through this period of market "correction" I find myself looking more at the depression than other financial crisis in terms of defining the problem.

Safehaven has an excellent historical piece about the depression

Everytime I look at this the problem seems to be about easy credit and loose lending standards.  In the depression era there was a belief around valuation that looked at asset valuation rather then earning valuation and ability to pay for things through earnings.  There was a run up on both the stock market and the real estate market, much like today, and it was caused by loose lending standards, much like today.  Take out the dates and era references to the above post and it could be written about today...

Go back and read my posts on Goldcorp and the "idiot" comments with respect to how equities are valued today.  That is the just of how bad people's judgment has gotten.  I have to get to work, but later I will find the links to these silly comments about how little I know about valuation and what I'm missing...

As for this northern living, it is -40 out there...  I sure hope my heat keeps working this time...  You have to love it when it is -48 with the wind chill and your heat stops working...  As of today, for the second time in two months I have no running water...  It seems that electrical devices are at great risk with northern living because there are many power surges and the heat and water have electrical devices to make them work.  The water is not from a gravity system coming to your home through pipes, which is what I'm used to, but it gets delivered every two days by truck to a big tank that requires a working pump for the water to get to your taps...

7 Comments – Post Your Own

#1) On January 28, 2008 at 10:21 AM, GS751 (27.50) wrote:

Maybe you have answered this before But I really want to know, why do you live there in the winter?
I've been up the Northwest Territories in the Summer and it is amazing so I can understand that, but being a Texan and all I don't understand the winters. 

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#2) On January 28, 2008 at 10:53 AM, joeykid13 wrote:

dwot,

 Thank you for having the courage to use the 'D' word, and posting this important message.  I have been waiting for a highly respected caps player, with some real gravitas, to suggest this review of history.  At the end of the day, I want the same thing for everyone as I want for myself, and that is the very best of everything, and nothing less.  If you have a chance, please review a CBS 60 minutes broadcast that appeared last night.  Americans are abondoning their homes because they owe more than they are worth, it is an ECONOMIC PANDEMIC, and right now, all of the big investment houses (of cards), are selfishly pillaging what they can, to protect their personal interests, before they collapse.  They figure the Justice Department and FTC will be so overwhelmed, that they will get away with it.  The Soc-Gen story is playing out 100 fold right before our eyes.  I am an eternal optimist by nature, and as such am drawn to the reality of the TRUTH, even if it is ugly.  Stay Warm!

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#3) On January 28, 2008 at 12:38 PM, FoolishChemist (96.95) wrote:

I can understand her thinking for living in the Northwest Territories.  She's waiting for global warming to take hold.  Texas, Florida, California will become so hot that people won't want to live there.  So she's buying land up there waiting for the next real estate boom as people migrate north.  She'll be the Donald Trump of Canada! :-)

Stay warm.  I won't complain about -10 F (-23 C) wind chills.

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#4) On January 28, 2008 at 3:55 PM, Montol (22.64) wrote:

I'm with you today dwot...-32C (-48C with windchill) here in Southern Alberta and my car won't start this morning.  Well, guess I'll just have to do more stock research...

Interesting post otherwise...its amazing what happens when you combine a bit of optimism, a bit of greed and loose credit... 

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#5) On January 28, 2008 at 7:22 PM, kdakota630 (29.73) wrote:

I read that piece, and it sure doesn't make me feel overly confident in the economy for the forseeable future

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#6) On January 29, 2008 at 3:51 AM, camistocks (< 20) wrote:

Antal Fekete, the author of this piece, is for the gold standard. The gold standard was a reason that led to the Great Depression. I'll do a blog on this myself sometimes.

Quote Fekete:

http://www.safehaven.com/article-9256.htm 

The world's finance capital is on its way to total annihilation. (Ugh!!) The essence of the subprime crisis was not the slack in lending standards. The essence is that the worm of doubt is eating confidence away. Banks no longer trust the promises of other banks.  Under a gold standard trust could quickly be restored by paying out gold. That's what gold is for, to restore trust whenever doubt arises. But gold has been removed from the banking system. Now irredeemable promises can only be redeemed by issuing more irredeemable promises. In such a system the erosion of confidence cannot be checked. Lack of confidence becomes cumulative. It is like kicking garbage upstairs. When the attic can take no more, the day of reckoning has dawned, and the garbage comes crashing down.

What can the individual do under these circumstances? He can salvage the pieces of his capital from the moribund international monetary system through the Yellow Brick Road. When you invest in gold, you transfer your capital, bit by bit, from Sodom and Gomorrah where it is doomed by the coming rain of fire and brimstone, to Emerald City of the New Gold Age.

 

Sodom and Gomorrah! No less! ;-)

As I wrote, bear blogs will be very popular in the next few months! 

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#7) On January 30, 2008 at 12:27 AM, dwot (63.09) wrote:

GS751, I teach and this is when school is open...  I got caught in the education cuts and so I ended up long term on call.  Up here they give me credit for my on call work, in Vancouver they don't.  You don't make it up to the top of the teaching pay scale until your 11th year of teaching your own class room.  Try your 51st year if you are on call.  My gross pay has almost doubled by coming to work here.  I can live quite comfortably on about 35-40% of my take home pay and the rest is discretionary.  We'll see how long I stay, but suppose I do, next year I should have an increase of minimum 3.5%, as that is a step, plus any cost of living increase, so probably 6-7%, which is more like 12-13% of the crap wage in Vancouver.  I also gain pension at double the rate.  I personally don't think we'll get the pension promised, but I am still gaining at double the rate.  It is financial, but I'd have to say I like the teaching much better here.

Joeykid, I don't get to watch videos here, too much bandwidth, but I did read the transcript.  Society has very much become everyone for themselves.

Lol FoolishChemist, it was so cold today I figured it I had to be out for 10 minutes my nose would be frost-bit.  I live a 4 minute walk from school.  One thing I don't think I am every going to get used to is going into the freezer and wondering if it is working because it just doesn't feel that cold.  Seriously, it is far colder outside.

Montol, I guess I am lucky I get to walk to work.

kdakota, I don't feel confident about it either.  My reading on austrian economics makes me feel even less confident.

Camistocks, I don't see the need for a gold standard.  Proper and responsive lending regulations would have prevented this mess.  The problem of course is the arrogance and ignorance of those who remove regulations and change wise regulations to a fool hardy mess...

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