James Wood

The Coming Depression: See It Clearly Through Historical Eyes

You suggest (fairly) my last line is ambiguous in that there is no clear relationship between the article and the success or failure of the Obama government stimulus plan. Let me provide some clarification.

The thrust of the article is that business cycles busts are usually created by excesses of money creation, new financial instruments which facilitate the money creation and decreasing credit quality. There is historical statistical and descriptive evidence to support this position, which the article briefly refers to, but which is amply supported from numerous areas.

A "solution" to these boom and bust cycles must be related and effective with the true problems. President Obamas's polices are equivalent to giving a drunk some "hair of the dog", i.e. more liquor. If the problem is excess money, poor credit and out of control financial instruments (derivatives), the solution is not to give more money and create more bad credit.

The Fed, particularity under Alan Greenspan and now with Mr Bernanke, is to print money to get out of problems. While this is a short term solution, up to a certain point, when applied in great excess it creates the type of problem we have today.

To be specific, the money creation policies currently being employed run the risk of creating hyperinflation, a problem far more serious than we currently have. They do not have any reasonable prospect, in my opinion, of solving the current problem other than deferring the problem somewhat and ultimately making it much worse.

These are the lessons we can learn from history, including very recent history.


On Feb 23 09:16 AM You're Kidding wrote:

> You say you see cycles in the above chart...
>
> I see nothing in it that would tell me when to get fully invested
> in this market, nor do I see anything in your article that would
> indicate you are willing to make any such predictions.
>
> That would be a smart move on your part and quite revealing as to
> how much practical, useful information you really think these "cycles"
> tell us.
>
> Nothing like having your cake and eating it, too. That's a winner
> if I've ever heard of one.
>
> But there's more! You conclude by saying:
>
> "If I am correct in the assertions made in this article, it raises
> serious doubts about the effectiveness of the Obama plan to fix the
> economic problems of the country."
>
> So let me get this straight. You are saying that these cycles you
> see, going back hundreds of years, portend the future success of
> what the government might do now? You realize, of course, that if
> the government was going to take say, a much different action, that
> your "model" would still raise the same doubts about its success,
> too? In other words, no matter what the government does, or doesn't
> do, it probably won't work, because of what your cycles tell us.
>
>
> Now, I know you haven't thought this through, because any logical
> person would see the complete irrationality of such thinking. So
> please, tell us you were wrong, so we don't have to put your name
> on the "Never Read Another Article From These People" list.
>