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TIME Magazine's Great Depression 2.0 Cover


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TIME Magazine's Great Depression 2.0 Cover

The New Hard Times - All I can say is "Wow !"

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One of the virtues of America is its ability to take a lesson, learn from its mistakes, fix its problems... and move on.

We may not have seen this virtue for some time. But the Time for Change is upon us.

 

Time Magazine's Oct.13, 2008 issue is heralding a change in attitudes. And it starts from the dramatic cover:

 

Cover image ............ : My own version

20081013107km6.jpg : aaa5fq3.jpg

CONTENTS, examples:

The End of Prosperity? (Cover Story)

A noted historian looks at parallels between this financial crisis and 1929 and shows what must be done to avoid Depression 2.0

 

EXCERPT

"The U.S. — not to mention Western Europe — is in the grip of a downward spiral that financial experts call deleveraging. Having accumulated debts beyond what's sustainable, households and financial institutions are being forced to reduce them. The pressure to do so results from a decline in the price of the assets they bought with the money they borrowed. It's a vicious feedback loop. When families and banks tip into bankruptcy, more assets get dumped on the market, driving prices down further and necessitating more deleveraging. This process now has so much momentum that even $700 billion in taxpayers' money may not suffice to stop it.

 

In the case of households, debt rose from about 50% of GDP in 1980 to a peak of 100% in 2006. In other words, households now owe as much as the entire U.S. economy can produce in a year. Much of the increase in debt was used to invest in real estate. The result was a bubble; at its peak, average U.S. house prices were rising at 20% a year. Then — as bubbles always do — it burst."

. . .

"the underlying cause of the Great Depression — as Milton Friedman and Anna Jacobson Schwartz argued in their seminal book A Monetary History of the United States: 1867-1960, published in 1963 — was not the stock-market crash but a "great contraction" of credit due to an epidemic of bank failures.

 

The credit crunch had surfaced several months before the stock-market crash, when commercial banks with combined deposits of more than $80 million suspended payments. It reached critical mass in late 1930, when 608 banks failed — among them the Bank of the United States, which accounted for about a third of the total deposits lost. (The failure of merger talks that might have saved the bank was another critical moment in the history of the Depression.)

 

As Friedman and Schwartz saw it, the Fed could have mitigated the crisis by cutting rates, making loans and buying bonds (so-called open-market operations). Instead, it made a bad situation worse by reducing its credit to the banking system. This forced more and more banks to sell assets in a frantic dash for liquidity, driving down bond prices and making balance sheets look even worse. The next wave of bank failures, between February and August 1931, saw commercial-bank deposits fall by $2.7 billion — 9% of the total. By January 1932, 1,860 banks had failed."

 

How They Failed Us (The Well / Nation)

When Washington tried to spend $700 billion to rescue Wall Street, voters revolted — then watched the markets plunge. Why the public's trust has vanished — and why it may not be coming back

 

Heeling Power (Life / Fashion)

How to wear the new sky-high shoes. And why women do

(Is this the carthartic "end of an era" article?)

===

 

For me the most enduring images of the last decade of wasteful spending will be the photos of big bonus earning: I-bankers, Hedgies,

and Private Equity types at play spending their money, and also maybe the shallow and selfish gold diggers from Sex in the City:

66533111ce0.jpg..sexandthecityks4.jpg..

 

 

Are Americans ready to move past that decade of lightly regulated city pigmen and unrestrained toxic gold-diggers?

 

(The best article of them all was on the last page):

 

Real Patriots Don't Spend

By NANCY GIBBS Thursday, Oct. 02, 2008

a_esgibbs_1013.jpg

(Anyone recall this old fashioned way of banking?)

 

"Judging from tales about the rise and fall of empires, there is always a point when things are going so well that the emperors doubt that anything could ever go wrong. "THRIFT," warned Nero's adviser Seneca, "comes too late when you find it at the bottom of your purse." In the Old World, nations grew fat and then lazy, until they collapsed under their own weight. But that was not to be our story. American greatness--the vision of the founders, the courage of the pioneers, the industry of the nation builders--reflected a mighty faith in the power of sacrifice as a muscle that made young nations strong. Banks were like gyms for the soul: the first savings banks in Boston and New York were organized as charities, where "humble journeymen" could exercise good judgment, store their money and not be tempted to waste it on drink. Architect Louis Sullivan carved the word THRIFT over the door of his "jewel box" bank nearly a century ago, for it was private virtue that made public prosperity possible.

 

That virtue died with the baby boom, but it had been ailing ever since the Depression, argues cultural historian David Tucker in The Decline of THRIFT in America. That crisis, he writes, invited economists to recast THRIFT as "the contemptible vice which threw sand in the gears of our consumer economy." A White House report in 1931 urged parents to let children pick out their own clothes and furniture, thereby creating in the child "a sense of personal as well as family pride in ownership, and eventually teaching him that his personality can be expressed through things." These days you can buy your baby daughter a BORN TO SHOP onesie with little pink purses on it." (with a Sex And the City logo, no doubt)

 

(Here's the last paragraph):

 

"There's no way to tell during this current distress whether we're repenting or just retrenching. THRIFT-store sales are up. Cars are shrinking. P. Diddy retired his private jet to save on gas. In hard times, people often rediscover the peace that prudence brings, when you try to spend a little less than you have because tomorrow might be worse. But that feels almost un-American; we're optimists by nature, and we've been living large for so long that solvency feels like a sacrifice. It will take some sustained character education--and leadership--to understand that morning in America is more likely to come again if we prepare for midnight."

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Here's how the Time Cover curse worked in the past, per the BigPicture Blogs comment near the peak in Property:

 

"We've seen some terrific Contrary market calls from magazine covers: Time magazine naming Jeff Bezos man of the year in December 1999 marked the top of the internet bubble; The March 21st 2005 Newsweek cover story, "The Incredible Shrinking Dollar," marked a key contrarian turning point in the greenback's fortunes. (The dollar has rallied 7% versus the euro and 2% against the yen since then). // as Cgnao points out below, this call wasnt so good //

 

Will the June 13th (2005) issue of Time magazine, with its giddy "Home Sweet Home" cover about the real estate market, prove to be similarly prescient?"

time_mag_home_cover.jpg

 

/see: http://bigpicture.typepad.com/comments/200...time_magaz.html

 

(And so it was)

One of the top builders, Hovnanian (HOV)

bigrm4.gif

Peak was end-July 2005

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For me the most enduring images of the last decade of wasteful spending will be the photos of big bonus earning: I-bankers, Hedgies,

and Private Equity types at play spending their money, and also maybe the shallow and selfish gold diggers from Sex in the City:

sexandthecityks4.jpg

 

In fact the same issue had some relevant comments about SITC and Candace Bushnell's new book:

 

EXcerpts from Article : Text and the City - the dark wisdom of Candace Bushnell's One Fifth Avenue

"Candace Bushnell is the the Evelyn Waugh of our time. Or she would be if Waugh had been a) a woman, and B) a terrible writer... Bushnell does something vewry similar with rich people in New York City. Just without the wit and style."

 

"One Fifth Avenue ... has an actual Weltanschauung - it gets at the deep truth of shallow people. Women control men with sex. Men control women with money. With rare exceptions, marriage is a Punch-and-Judy slugfest that ends in either divorce or one party's total subjugation."

 

"These are bleak truths that Carrie Bradshaw could never grasp. Her life in Sex and the City is a fairy tale fever dream of shopping and dating from which she will never awaken, no matter how many princes kiss her... Lola, the gold digger, ... arrives in Manhattan expecting - nay, demanding- a West Village apartment and a Mr. Big." (as in Big walley, not big ... well, you know)

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The March 21st 2005 Newsweek cover story, The Incredible Shrinking Dollar," marked a key contrarian turning point in the greenback's fortunes. (The dollar has rallied 7% versus the euro and 2% against the yen since then).

 

Bubb, I am surprised you posted such a piece of total bullshit.

 

EUR/USD 21 March 2005 1.3162

Today 1.38075

 

Even after the recent bounce, the USD is 5% lower than it was on 21 March 2005.

 

Today as three years ago, the USD bounce is nothing more than a dead cat.

 

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EXCERPT

"The U.S. — not to mention Western Europe — is in the grip of a downward spiral that financial experts call deleveraging. Having accumulated debts beyond what's sustainable, households and financial institutions are being forced to reduce them. The pressure to do so results from a decline in the price of the assets they bought with the money they borrowed. It's a vicious feedback loop. When families and banks tip into bankruptcy, more assets get dumped on the market, driving prices down further and necessitating more deleveraging. This process now has so much momentum that even $700 billion in taxpayers' money may not suffice to stop it.

 

 

Looks very interesting BrBubb - how did you get hold of it a week early?

 

 

 

 

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Bubb, I am surprised you posted such a piece of total bullshit.

 

EUR/USD 21 March 2005 1.3162

Today 1.38075

 

Even after the recent bounce, the USD is 5% lower than it was on 21 March 2005.

 

Today as three years ago, the USD bounce is nothing more than a dead cat.

 

Nonsense. That heralded a bounce in the dollar, not a major turn up (as the blogger wrongly said.)

But I grabbed the blogger reference for the Property Cover, check it against the top in US Builder stocks (chart coming).

 

The TIME magazine curse has a terrific record as a contrarian indicator.

There's another GEI thread about it:

http://www.greenenergyinvestors.com/index....34&hl=curse

 

I am still working on this thread, I havent even added the key excerpts to the Header yet.

Please come back and have another look when that is done

 

Looks very interesting BrBubb - how did you get hold of it a week early?

 

The Asia issue is already out, and most of the excerpts in the Header (so far) are from the website

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The March 21st 2005 Newsweek cover story, "The Incredible Shrinking Dollar," marked a key contrarian turning point in the greenback's fortunes. (The dollar has rallied 7% versus the euro and 2% against the yen since then).

 

Your statement and a comparison of the EUR/USD exchange rates on 21 March 2005 vs today are evidence that you are smoking excellent stuff. Can I have some please?

 

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Your statement and a comparison of the EUR/USD exchange rates on 21 March 2005 vs today are evidence that you are smoking excellent stuff.

Can I have some please?

 

?? That's not my statement?? My original point I was making had nothing to do with the dollar.

It is an excerpt from a blog- the words are another's. Do Check out the track record of the Time magazine cover curse.

And look at the date of the Cover on Property (mid-June 2005) and compare it with the date of the top in US property stocks.

My reference is to Property, and the track record of TIME is reflecting cathartic extremes in fear and enthusiasm.

 

BTW, I dont think this is the end of the "Great Depression 2" stories.

But I do believe it may be heralding a good bounce in stocks from a low sometime in October 2008.

 

I do think the October Low can be revisited and exceeded on the way to a 2010-2012 (?) Depression.

The TIME issue is a good one because it may be signalling a change in American attitudes towards debt and savings

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will you two stop nit picking.

 

Cgnao seems so eager to make some points about the dollar being weak (which I agree with anyway),

that he hasnt bothered to reflect on the Main point of the thread. That is a shame

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ASIA's RELIANCE ON EXPORTS - from the same issue

Exports as a Percentage of GDP

Vietnam ........ 76.8%
Taiwan ……….. 73.8%
South Korea .. 45.6%
China ………….. 40.7%
Indonesia ..…. 29.4%
India ……….….. 21.2%
Japan ........... 17.6% %

The article goes on to talk about China's property market:

High living - Construction is (was?) rampant, yet China is facing the bust of a property bubble.

"China, where construction of comeercial and residential projects is especially rampant, may be facing 'an immanent bust of a real estate bubble," Merrill Lynch warned in a September report. A recent survey of households by Chiuna's central bank found only 13% were planning to buy property, the lowest figure since the survey started in 1999. In the wealthy industrila city of Shenzhen, reports suggest property prices may have fallen 30% from the recent highs."

 

(Without wanting to be to critical of report I havent read, it looks like the bust may have happened already. Ther question should be, how long will it last, and how negative can sentiment get before it bounces back.)

"Steep declines in asset prices pose not only a worry for economic growth, but also social stability, as ordinary folks watcvh their personal wealth evaporate. In China, the property sector accounts for 10% of national employment. Analysts believe that Beijing cannot afford a major collapse in the property market and will step in to aid developers andhome buyers."

(Yes, I am hearing those rumors too. China has alreday cut rates by 0.2%, the first cut in six years. There are rumors going around Hk that more cuts and loosening is immanent.)

"Beijing already lent a hand to the faltering stock market in September by waiving taxes on some stock transactions to stimulate trading and ordering state agencies to buy up shares."

(Why not mention the rate cut here?)

CSI-300 Stock Prices ... http://tinyurl.com/CSI-300

charth152w240range1ytypbd5.gif

The CSI 300 Index is a cap-weighted index. The index tracks the daily price performance of the 300 most representative A-share stocks listed on the Shanghaior Shenzhen Stock Exchanges. The index was launched on 4/08/2005 and has a base of 1000 on 12/31/2004. Historical pricing is not yet available. Index trade volume on Q is scaled down by a factor of 1000

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