Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Cogito Ergo Sum who wrote (15453)	6/18/2004 1:54:16 PM
From: NOW	Read Replies (1) \| Respond to of 110194

To say it is similar, doesnt mean that we should expect an exact repeat. Indeed, the US 's imperialist intentions now are much more akin to Japans at that time, IMO

To: Cogito Ergo Sum who wrote (15453)	6/18/2004 7:28:50 PM
From: glenn_a	Respond to of 110194

Hi Kastel. Well, the situation is different in that the players are different, but the situation is really very similar. Caroll Quigley argued in his Tragedy and Hope (quite convincingly I might add) that the Great Depression of the 1930's was really a delayed reaction to changing geopolitical power relations that were evident post-WWI, but were delayed. Specifically, this was the decline of Britain, the emergence of the U.S., and the rise of other nations on a relative basis in comparison with Britain & France. (BTW, Quigley's book can be found at the following link: amazon.ca ) Effectively, with the exception of the U.S., nations emerged out of WWI with very weak balance sheets. And of course, Germany in particular with war reparations had significant problems in the absence of fresh loans (of which she amply received from the U.S. post 1925 or so). The debt in the economy kept interest rates low throughout the 1920's, but the quality of loans continued to deteriorate. Effectively, the entire world was living beyond its means on U.S. credit (whereas today the entire world is living beyond its means on Central Bank credit of every variety). Another thing, Quigley emphasizes is that the gold standard of the 1920's was not just "any old" gold standard, but rather set to price parities similar to those that existed prior to WWI. As Britain was losing its economic prowess, maintaining exchange rates at pre WWI levels proved very deflationary to Great Britain. As credit quality deteriorated throughout the 1920s, in spite of easy money which caused a massive speculative boom in financial asset prices, it finally reached a wall, and the rest as they say is history. So fast forward to today. Like WWI, we had they ending of the Cold War in the late 1980's. Like the end of WWI, at the end of the Cold War the world's superpower was not the virile young upstart she was some 50 years prior. For one, she had transitioned from the world's largest creditor nation to the world's largest debtor nation. Free movement of goods and capital, diffusion of technology and the advent of the Internet, and wage labor arbitrage, was causing the relative decline in her economic might, much as had occurred with Great Britain some 70 years earlier. Like the 1920's, the 1990's saw the Cold War victors unable or unwilling to adjust to new economic and geopolitical realities, and the U.S. began an orgy of credit creation and borrowing, and currency management, to maintain the purchasing power of the $ at artificially high levels, and greatly weaken the soundness of the global credit system. Oh, and the 1990's and 2000's saw the Anglo nations (surely supported by many other powerful nations) develop war plans to "proactively" secure raw materials. Such warfare to secure scarce raw materials certainly had its parallel earlier this century when Russia, the U.S., Germany, and Japan were emerging as powerful economic players who competed for access to raw materials with the British, French, and Dutch. But you are certainly right that the U.S. is not the self-sufficient economic actor that it was earlier in the 20th century. It's position today is perhaps similar to Japan's early in the 20th century. Security of supply appears to be an issue for many nations today, but this was also true of most nations then also, though the U.S. was somewhat unique in the early 20th century compared to European nations given her vast bounty of natural resources A fascinating time to be alive that's for sure. Best wishes, Glenn