Early economist Irving Fisher argued that the predominant factor leading to the Great Depression was over indebtedness and deflation; Almost 80 years later this looks very familiar, doesn‘t it?
By Daniel at 22 November, 2008, 8:41 pm
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Fisher tied loose credit to over-indebtedness, which fueled speculation and asset bubbles. The chain of events,according to Fisher proceeded as follows:
1 Debt liquidation and distress selling
2 Contraction of the money supply as bank loans are paid off
3 A fall in the level of asset prices
4 A still greater fall in the net worth of businesses, precipitating bankruptcies
5 A fall in profits
6 A reduction in output, in trade and employment.
7 Pessimism and loss of confidence
8 Hoarding of money
9 A fall in nominal interest rates and a rise in deflation adjusted interest rates.
Almost 80 years later this looks very familiar, doesn‘t it?
P.S
With declining sales and tight credit you are going to see a lot of stock drop further in value come January. There will also be worse earnings reports come March.
Stocks are not cheap at current valuation with what’s coming down the pike.
Recovery will begin xmas 2010.
Congress has to rein in those CEOS and their plunder of Investor & taxpayer funds. It is downright criminal. Ford had 6 executive aircraft for one CEO. How ridiculous can it get?
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