Great Depression

“An alien collectivist (socialist) philosophy, much of which came from Europe, crashed onto the shores of our nation, bringing with it radical changes in economics, politics, and education, funded - surprisingly enough - by several wealthy American families and their tax-exempt foundations.

I’ve received a number of emails regarding the fact that stocks continue to rally despite Europe being on the verge of Collapse. Once again, investors are forgetting that stocks are the most clueless asset class on the planet.

Indeed, here are three reasons why this latest stock market rally isn’t to be trusted.

Ben Bernanke's zero-interest rate policy (ZIRP) and command-economy efforts to maintain mispricing of risk, debt and assets are destroying capital and capitalism. No wonder his policies have failed so miserably. Bernanke's policy is to punish capital accumulation and reward leveraged debt expansion. Rather than enforce the market's discipline and transparent pricing of risk, debt and assets, Bernanke has explicitly set out to re-inflate a destructive, massively unproductive credit bubble. This is why Bernanke has failed so completely, and why he will continue to fail. He is not engaged in capitalism, he is engaged in the destruction of capital, investment discipline and the open pricing of risk, debt and assets.

We have now entered the fifth year of this Fourth Turning Crisis. George Washington and his troops were barely holding on at Valley Forge during the fifth year of the American Revolution Fourth Turning. By year five of the Civil War Fourth Turning 700,000 Americans were dead, the South left in ruins, a President assassinated and a military victory attained that felt like defeat. By the fifth year of the Great Depression/World War II Fourth Turning, FDR’s New Deal was in place and Adolf Hitler had been democratically elected and was formulating big plans for his Third Reich. The insight from prior Fourth Turnings that applies to 2012 is that things will not improve. They call it a Crisis because the risk of calamity is constant. There is zero percent chance that 2012 will result in a recovery and return to normalcy. Not one of the issues that caused our economic collapse has been solved. The “solutions” implemented since 2008 have exacerbated the problems of debt, civic decay and global disorder. The choices we make as a nation in 2012 will determine the future course of this Fourth Turning. If we fail in our duty, this Fourth Turning could go catastrophically wrong. I pray we choose wisely. Have a great 2012.

In his latest letter, Bill Gross, obviously for his own reasons, essentially channels Zero Hedge, and repeats everything we have been saying over the past 3 years. We'll take that as a compliment. Next thing you know he will convert the TRF into a gold-only physical fund in anticipation of the wrong-end of the "fat tail" hitting reality head on at full speed, and sending the entire house of centrally planned cards crashing down. "How many ways can you say “it’s different this time?” There’s “abnormal,” “subnormal,” “paranormal” and of course “new normal.” Mohamed El-Erian’s awakening phrase of several years past has virtually been adopted into the lexicon these days, but now it has an almost antiquated vapor to it that reflected calmer seas in 2011 as opposed to the possibility of a perfect storm in 2012. The New Normal as PIMCO and other economists would describe it was a world of muted western growth, high unemployment and relatively orderly delevering. Now we appear to be morphing into a world with much fatter tails, bordering on bimodal. It’s as if the Earth now has two moons instead of one and both are growing in size like a cancerous tumor that may threaten the financial tides, oceans and economic life as we have known it for the past half century. Welcome to 2012...For 2012, in the face of a delevering zero-bound interest rate world, investors must lower return expectations. 2–5% for stocks, bonds and commodities are expected long term returns for global financial markets that have been pushed to the zero bound, a world where substantial real price appreciation is getting close to mathematically improbable. Adjust your expectations, prepare for bimodal outcomes. It is different this time and will continue to be for a number of years. The New Normal is “Sub,” “Ab,” “Para” and then some. The financial markets and global economies are at great risk."

Art Cashin recalls how it all started 81 years ago. Naturally, it "ended" with World War 2. Will history rhyme, or will "this time be different"?

Every year, at about this time (roughly just before the Fed launches on yet another monetary easing crusade) we get requests to decompose current events into their constituent pieces and present these in parallel with the period in time between 1929 and 1939 better known as the Great Depression. Obviously, doing so in its entirety would require at least a fat paperback, and considering that the average Zero Hedge reader has an attention span that is very stretched when presented with a lengthy bullet point, we fear such efforts may be lost on most. Furthermore, why reconstruct the wheel when it was precisely a year ago (and remember: 2011 is a carbon copy of 2010, so it is effectively yesterday) that Guggenheim's Scott Minerd did just that and in a far more politically and grammatically correct way than we ever could, not to mention with that many more pretty charts. So without further ado, here is Scott Minerd's compare and contrast of the Second Great Depression (the one we are now debating whether or not it has become a recession or not once again) to the original source.

Another must read from one of the "less cheerful" people on MarketWatch. His 7 reasons why "kicking the can" should no longer be the official policy of the ponzi banker syndicate: 1: Capitalism’s now a lethal soul sickness, needs a reawakening; 2. We’re already in the early stages of a Great Depression; 3. Good Depression exposes our self-destruct bubble-thinking; 4. Good Depression will stir outrage, force real reforms; 5. Good Depression forces Wall Street to think outside the box; 6. Good Depression will deflate America’s warring soul; 7. Good Depression now … avoids a far bigger depression later

After surviving the start of the Second Great Depression, and living in its first great bear market bounce/short squeeze, where now all the attention is focused on a collapsing Europe, many could be wondering how, if at all, it would have been different to have lived through the first Great Depression. Luckily, courtesy of the recent release of the BIS's full annual reports, history buffs can now replay, year by year, the events in world capital markets from 1931 onward. We have put particular emphasis on the dark days of the 1930s. Below we present the first several such years as seen from the perspective of the BIS. Note the endless similarities - in fact one could say the only difference between then and now is the lack of "liquidity providing" algos (soon, there will be an iPad app for that) to front run slow and stupid retail/pension/mutual fund money. Pay particular attention to the role of gold in the crisis period, the amusing reference to FDR's confiscation of gold in 1933, and how the mood of insecured optimism shifts to one of endless gloom, and ends, as everyone knows, with World War 2.

1349 Florence?

No, QE3 is NOT the answer ...

The Fed may be talking like Smokey the Bear, but it continues to hand out matches trying to increase leverage ...

To find out, we'll look at a couple comparisons to get an idea of what is going on in the rest of the economy. And then we'll compare the government's efforts in the 1930s to today ...

I'm all for capitalism, but Banana Republic level inequality is killing us ...

It depends where you live, your race, income and age ...