History Repeating Itself?

Posted on October 27, 2010

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Pragmatic Capitalism asked the question – “Is this 1937-38 all over again?” 1937 is important because after experiencing economic growth for a  couple of years, the US economy fell sharply into a great recession.  (It’s a topic of debate  as to whether the 1937 slowdown was a new recession or an extension of the Great Depression.  Doesn’t really matter though…)

I’m not a technical analyst by any stretch, but in reading Benjamin Roth’s diary, I was playing out the movements of the stock market back then and now.  So, I charted the Dow Jones then and now.  Wow – spooky.

Then:

Dow Jones Industrial Average (1926-1939)

Now:

Dow Jones Industrial Average: 2008-present

The current Dow Jones times series is compressed as compared to the 10-year horizon early this century, but can’t help to notice the drops, percentage of drops, recoveries, subsequent drops, and patterns. You can read up on government intervention and its role in the eventual economic recovery from the Great Depression, but just keep in mind that we may not be out of the woods yet.  The infusion of government spending this time around was enormous.  Gigantic. Colossal.  Maybe, just maybe, the perceived recovery is due to this government intervention.

Posted in: economics, Government