Market rally like the 1970s?
In the 1970s, a bear market was disguised by a series of market rallies. Some think a similar phenomenon might be occurring now.
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We don’t know. But our guess – and it is only a guess – is that the process of deflation, deleveraging, and depression has only just begun. The problems – too much debt, too many bad investments, too much money badly allocated – that existed before the crisis of ’07-’09 have not been corrected. There are still millions of people in houses that they can’t afford. There are still millions of mortgages for more than the houses are worth. There are still trillions of dollars at risk…still waiting to be worked out, written off, or inflated away.Skip to next paragraph
Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind The Daily Reckoning (dailyreckoning.com).
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The major contribution of the Bush/Obama administrations has been to add to these credit mistakes with trillions more in federal debt. That, too, will have to be reckoned with. But now there is Ben Bernanke at the Fed, not Paul Volcker. Now we are dealing with deflation (we think), not inflation. And now we have total official US debt 10 times as great as it was when Carter left office…and 3 times as much in terms of GDP.
What can we expect? Well, here’s one thing we feel fairly sure of: ahead lies a crisis much worse that the recession/bear market of the early ’80s.
What is wrong with these New York Times columnists? David Brooks is a smarter version of Thomas Friedman…which is to say, he is more thoughtful. But his thoughts seem to run into similar dead ends. He notes that more men in America are finding it difficult to be the breadwinners of their families. Women now get more college degrees than men. And women typically work in industries that are not suffering as much as construction and manufacturing, where men work. Result: men are out of work and out of money. And who wants to marry a man with no work and no money? So, men end up being lonely too.
Naturally, Brooks has a solution: “we need to redefine masculinity, creating an image that encourages teenage boys to stay in school and older men to pursue service jobs.”
That’s right. “We” need to do that.
And this too: “somebody has to provide institutions for unaffiliated 24-year-olds.”
Don’t worry. Someone will. Someone will give them black shirts. And set them to marching in the streets, beating up ‘class enemies.’ Someone will do something…and make the situation worse.
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