Home » Uncategorized » Graphic Anatomy of a Stock Market Crash: 1929 stock market crash, dot-com, and Great Recession
            

Graphic Anatomy of a Stock Market Crash: 1929 stock market crash, dot-com, and Great Recession

Gathering around the stock ticker during the 1929 stock market crash.

The 1929 stock market crash became the benchmark to which all other market crashes have been compared. The following graphs of the crash of 1929 and the Great Depression that followed, the dot-com crash, and the stock market crash during the Great Recession show several interesting similarities in the anatomy of the world’s greatest financial train wrecks. They also show some surprises that run against the way many people think of these most infamous of crashes.

 

Graphing the 1929 Stock Market Crash

 

The stock market roared through the 1920’s. Building construction, retail, and automobile sales advanced from record to record … but debt also climbed as a way to finance all of that. This crescendoed in 1929 when the stock market experienced two particularly exuberant rallies about a month apart (one in June and one in August with a plateau between).

Then retail, housing and automobile sales started to fall apart.

Sound familiar?

Keep reading….

(The pattern is similar to what I described in my recent article, “Irrational Exuberance During Trump Rally Exceeded All Records! We’re sailing into a massive stock-market crash.“)

After the Dow peaked in ’29, it traded sideways for half of September and then took a fairly steep drop in the remaining half; yet, it recovered almost half of its fall during that infamous October, before rounding off quickly and plunging to its near death on Black Tuesday.

People tend to forget or not notice that even the infamous Black Tuesday crash on October 29, 1929, dog-legged back up the next week quickly and then crashed even harder over the next two weeks. Bouncing back up to its October 29 bottom, it stabilized, at a point down about 120 points from its peak, which meant the market recovered to a point about 33% below its summit. At it’s worst point that year, it was down 44%.

 

Graph of the Dow during 1929 stock market crash

Graph of the Dow during the 1929 stock market crash

 

“Black Tuesday” or the “Crash of 1929” was just the most infamous of the plunges that took the world into The Great Depression. People also tend not to be aware of the fact that the market first experienced a “Black Thursday” the week before the infamous plunge. So, let’s dissect the anatomy of the 1929 stock market crash in a little more detail.

 

The bigger picture of the 1929 stock market crash – The Great Depression

 

First, you can see the two particularly exuberant rallies during the summer that preceded the 1929 stock market crash a little better in this graph:

 

 

Chart of the 1929 stock market crash of the Dow Jones Industrial Average

 

The 1929 stock market crash warned of its arrival with a foreshock in March when the Federal Reserve warned about rampant speculation (“irrational exuberance” during which people believed the bull market would last forever because the bull market had been running for nine years during which time, the Dow increased in value tenfold). The Fed’s proclamation created enough of a shock, tiny as it appears on the graphs above, that National City Bank announced it would provide $25 million in credit to arrest the slide. While that event is an almost unnoticeable blip on the graph above, it was a foreshock of problems that would develop into something enormous, and it was arrested only by bank intervention with what was serious money at the time.

A larger foreshock came in May, but the market went from that second event directly into its steepest rally — this in spite of the fact that construction was already cooling down and auto sales were tanking, and consumer had climbed a high wall of debt.

Wikipedia provides a good overall history of the crash of 1929, including the overzealous optimism and how that optimism fell apart before the big crash. People tend to think optimism continues in some monolithic form unabated until the exact day of a crash; but in 1929 people began to worry clear back in March. Those worries grew intense by September, but the many worries didn’t stop the market from climbing and didn’t stop the permabulls from making stupid proclamations like “Stock prices have reached what looks like a permanently high plateau.” When the market made its first major break in September, becoming severely unstable, many saw even that as a “healthy correction,” failing entirely to see how bad things would become in spite of the obviously shoddy economic fundamentals building up in many parts of “Main Street.”

The Black Tuesday event actually took an entire month with that Tuesday simply being the worst of many bad days. After that horrible October, you can see in the graph above that the market slowly recovered almost half of its losses over the course of about half a year. Many thought the worst was over, but the worst was yet to come. From there, the market began a long jaunt downhill into the belly of the Great Depression, which ultimately graphed out to looked like this:

 

 

 

 

As you see, MUCH worse was yet to come. The Great Depression looks more like a run of steep rapids, and its biggest drop on a percentage basis did not happen until 1932! (See logarithmic chart below. The value of looking on a percentage basis (logarithmic) is that a 100-point drop in the market means you lose half of your money if the market was only at a total of 200 points; but when the market is at 20,000 points, a 100-point drop is only a loss of half of one percent of your money. So, the percentage of the market lost in each drop can be more important than the actual number of points lost. On the other hand, it’s also easier to experience large percentage changes when you are working with something small than with something extremely large. That’s true in all endeavors, so looking at things logarithmically is not always the best way.)

The belly of the Great Depression saw a stock market that had finally fallen by twice as much as the initial crash. The bear market lasted three years, and the market didn’t recover to its previous peak until twenty-five years later!

 

 

Logarithmic chart of the stock market crash of 1929 - Dow Jones Industrial Average (DJIA)

Logarithmic chart of the stock market crash of 1929 – Dow Jones Industrial Average (DJIA)

 

The market didn’t fall, go flat and then fall again. Every time it crashed, it bounced way back up and then fell harder — two steps down, one step up; two steps down, etc. (For regular readers, when I have talked in the past about the coming “Epocalypse,” I’ve been talking about the full run of waterfalls and rapids all the way to whatever the final bottom will be, not the first crash; and I’ve been talking about the entire global economy, not just the New York Stock Exchange, which isn’t even the entire US economy.)

When you look at the Great Depression, you can see that the greatest stock market crashes cannot be assessed by their first drop over the edge. These crashes are far greater beasts that are the sum of many falls. The enormity of any major crash cannot be appreciated until years after it began. To see how that is so, let’s compare the 1929 stock market crash to the more recent major collapses that more people are personally familiar with, particularly the Great Recession (being closest in global impact to the Great Depression), but first the dot-com crash.

 

The dot-com crash

 

It was in the lead-up to the dot-com crash that Alan Greenspan coined the term “irrational exuberance” in speaking of his concern that the market may have been overheating. Greenspan called it that because the market turned into a feeding frenzy where everyone wanted in because it looked as if the bull market could never end. Anyone should be able to see that such thinking is completely irrational, but somehow the majority of people actually don’t. In fact, Greenspan coined the term in December of ’96, long before the greatest level of euphoric bidding was seen. Even when he coined that phrase, he had no idea how overheated the market would actually become as it continued to climb into the sun and then melt like Icarus.

Just as one can see in the graph of the 1929 stock market crash, at no point during the period graphed prior to the dot-com crash did the market ramp up as steeply for as long as it did just before the crash. In fact, just as in 1929, the market rally showed two particularly steep bursts of euphoria with a brief plateau between them. Just as in ’29, it was as though the market sprinted as fast and as high as it could, stopped to catch its breath, and then made one final leap upward toward its summit.

 

 

Graph of the dot-com stock market crash

Graph of the dot-com stock market crash

 

 

You can also see clearly in graphs of both stock market crashes that the big plunge that became most identified with that particular crash did not happen right after the irrationally exuberant rally. In the case of the 1929 stock market crash, the big plunge came a month-and-a-half after the market’s peak. In the case of the dot-com crash, it came more than a year-and-a-half after the market summited. There was plenty of warning that the bull market was falling apart, but the majority would not see it.

Also, just as in the 1929 stock market crash, the biggest plunge of the dot-com bust happened in the fall. In fact, three of the biggest drops during this three-year breakdown happened in September or October (with two of them being in October, as was the case in the 1929 stock market crash). It seems the market loves a good October surprise when it comes to its worst breakdowns. August and September tend also to be bad months.

Just as with the Great Depression, the dot-com bust played out in a series of major plunges over the course of years before the market finally found its bottom. In neither case was the great “crash” a relatively straight line of decent to the bottom. There were many attempted-and-failed rallies along the way. As with the 1929 stock market crash, the first plunge in the dot-com bust-up wasn’t even the biggest. Although in 1929, Black Tuesday came only a couple of weeks after the first big drop, during the dot-com collapse, the biggest plunges over the cliff would be either the fourth of fifth of the major drops (the fourth being the steepest, the fifth being slightly longer in duration).

What the dot-com bust made most clear is that the nation’s biggest stock market crashes are not airplane slams into the ground with a burst of flames but slow-motion train wrecks. That is to say, they happen over a protracted period. That’s not immediately obvious in our memories because when we think of them, we tend to label them by the most horrifying plunge that really got everyone’s attention.

You can also see that people had a major warning of the dot-com bust in the form of a huge foreshock in late Summer and early fall of 1998. As with major earthquakes, there are always foreshocks and aftershocks that play out for months around these big shakeups. You’ll also see the foreshocks and aftershocks confirmed in the anatomy of the our nation’s second-most memorable stock market crash:

 

Graphing the stock market crash of 2007-2009 – The Great Recession

 

Graph of the Great Recession Stock Market Crash from 2006 to 2009

Graph of the Great Recession Stock Market Crash from 2006 to 2009

 

From this graph, you can see that the Great Recession stock market crash — the closest equal in overall impact to the Great Depression — started in much the same manner as the 1929 stock market crash and the dot-com bust. Once again, the market experienced its steepest run-up in a burst of glory just before its peak. In all three crashes, that run-up came out of a minor valley, almost as if that first drop before the summit was a bit of a foreshock. The run-up to the summit is always a steeper sprint than the market saw for many months/years prior (hence “irrationally exuberant” because its climbing faster than makes any sense, given that the market is really about to break and that economic fault lines, such as declining auto sales and declining housing sales are starting to show). The market seems to only summit after staging a last hurrah.

There is a slight difference between the 1929 crash and the financial crisis of ’07-’09. In ’07 the market experienced a single two-month-long rally of irrational exuberance from April through May of 2007, and then it bounced along mostly sideways through June, attempted an even steeper rally in August followed by its first plunge in late August. Maybe that is not that different; it’s just that the breather between the two bursts of exuberance was a little longer.

A more notable difference is that the first peak after the rally proved to be a false summit. After a fairly significant drop, the market recovered to an ever-so-slightly-higher peak before it began its years-long cascade to the bottom. It’s not higher enough to mean anything. It is more like the market this time experienced twin peaks. The market’s extended and bouncy top took five months from the end of the exuberant rallies and from the market’s first peak to hit this second peak. What this shows in a clearer way is that even after the exuberant rallies, the market may bounce along a top for quite a long time before it finally moves irreparably down in a decline that will be devastating for years.

The market’s first minor drop into what became a downhill run of many years happened in October with a minor attempt at a rally and then a deeper plunge at the start of November. This time, October wasn’t one of the big plunges, but it was the turning point so still very significant in the anatomy of this crash.

Again, the first drops were also nowhere near the biggest. The market took a deeper plunge still in January of 2008, an even deeper but more protracted fall in June and July of 2008, but the infamous plunge that this stock-market crash is most remembered for didn’t happen until the fifth plunge after the first summit of its twin peaks. As if to prove the rule, that notable crash happened in October, a year after the market’s bearish run began. While the market made its initial downturn in the first October, it fell completely over the cliff on its second October.

Similar to the Great Depression, the market’s total crash took numerous months to reach its bottom and saw many failed rallies along the way. Just when people thought the market was finally bouncing along its bottom, it took one more enormous one-month plunge to find its absolute bottom, just as it did in the Great Depression.

 

What are the similarities and differences of major stock market crashes?

 

Only when you compress all of these crashes into a chart covering the full life of the Dow (and I use the Dow because it has the longest history of the major indices) does it appear that each crash happened in one massive plunge:

 

Logarithmic graph of all stock market crashes on the NYSE from 1900 to present.

Logarithmic graph of all stock market crashes on the NYSE from 1900 to present.

 

The truth about major stock market crashes is that months stretch on into years before the crash has fully played out. Their most memorable leaps off a cliff also happen somewhere after the initial decline — often way after — and there is always more than one major plunge. So, we talk about the crash of ’29, though there were two major crashes and many plunges in the Great Depression. We talk about Black Mondays or Black Tuesdays because we like days that put a handle on things for ready reference, but the more accurate picture is years of ups and downs with the downs always being larger than the ups. Really, the most notable thing is how long these bear markets run and how far they fall during their series of cascades to the bottom.

In summary, really big crashes do round off first. In 1929, the round-off was short, but in other cases, the top has taken many months. The first drop is usually minor, while the first plunge over a cliff (even when it is as infamous as 1929’s Black Tuesday is … 1) only one of many, and 2) not necessarily the worst of the many falls (especially as a percentage of the market’s total value). The total “crash” is always broken up by bear-market rallies that, at the time, cause people to think the bottom is in, and the “crash” is a train wreck takes years to play out. These crashes only look like a single major event when you compress them onto a century-long chart.

 

Histories of the world’s worst stock-market crash:

 

  • Kim

    i appreciate what you’ve done here merging these crashes into a single chart showing that these notable crashes, or declines, as they were, were preceded by foreshocks, but then these crashes could actually be none other than foreshocks themselves- to the main event, or the “mainshock”, that still lies ahead.

    But can the central banks stop it? Can the CBs control it? There are natural, universal economic laws that will assert themselves regardless of what the central banks attempt to do. The bankers can run but they can’t hide.

    • That’s what I think, too. On the face of it, they can control it forever because they can print money forever. So long as the money stay’s in stocks and doesn’t work its way to mainstreet, the only thing that inflates are stocks. Infinite money, created at will, goes a long way. Like you say, however, there are natural laws, and history is replete with examples of efforts by mankind to circumvent nature that ultimately turned into worse disasters.

      There are always hidden costs to circumventing nature, and those collateral damages that you weren’t anticipating are things you are also, therefore, not watching. Because of that, they sneak up on you; and they can really hit with a vengeance when nature decides to self-correct.

      The danger when you are trying to control things as complex as economies lies in what you don’t know, which may simply be those things your own school of thinking blinds you to. The Fed seems to be quite blind at times, as I’ve noted in other articles. They ascribe to a Keynesian school of thought that has its own blind spots, as any one school does; and their pride also blinds them. The very fact that they profess to believe the economy is perking along fairly well right now when we have a retail apocalypse, armageddon, and a housing market that is wavering in some sectors, tells me they are blind.

      Therefore, I’m quite confident this is going to end horribly. What I’m not confident of is exactly how the pieces fall apart. With the Federal Reserve and other central banks doing numerous things to prop up stocks that they’ve never done before, it is, as Steve says below, different this time. Nevertheless, history tells us that those who think they have simply circumvented natural laws so that they no longer apply, are usually terribly wrong.

      I’m still of the belief that the pressured created in the economy by the things that I’m certain are going to go wrong (and now ARE going wrong) are going to mount fairly quickly and will soon overwhelm them. If they follow through on unwinding their balance sheet, they will be sucking the juice of of the economy at the same time. Even though they may suck out very little, the economy has no reserve capacity, so any of the liquidity the Federal Reserve sucks out will make the economy worse.

      They may see this happening and may stop their unwind quickly if they do, but I think they tend to see things too late and adjust their opinions too late. The damage of anything they’ve already done at that point will continue to play out another six months past the point where they stop doing it.

      On top of that we will have a black-swan event or two most likely because there are so many lurking in the wings, such as war with North Korea. I don’t believe they can hold out against all the bad that is coming in this nation that is too divided to work out any answers on the political level.

      • Kim

        I’ve done some research on the Keynes school of economic thought. It has actually some sound reasoning behind it, but it was never intended to be a long-term monetary policy.

        Believe what you will about a Peter Schiff, I think he’s correct when he points out that the FED has painted itself into a corner with its Keynesian economic policy. It’s stuck in a low-interest rate environment that it itself engineered.

        When I speak of natural economic laws reasserting themselves, one of the main things I think of is interest rates on debt. For example, today Italian HY BB-rated bonds yielded less than the benchmark 10yr US treasury bond. So these junk bonds are a safer bet than the US 10yr? Hardly. This is just a twisted result of the ECB’s corporate bond-buying program. This insanity illustrates just exactly how central banks have already lost control of the situation and have created something unnatural and fully unintended in order to keep the casino running.

        And you’re right, this is only going to make matters worse in the end. There are too many unknowns, too many things that can and will go wrong, too many variables, for this game to keep running.

        The mainshock is ahead of us, and really the only thing we can do now is wait, prepare as much as we can, and watch how it unfolds and pray we, and our loved ones, survive it.

        • Exactly! I think if it were applied as Keynes intended, there could be some benefits, but we apply only for the benefit each time and refuse to pay the costs on schedule. The idea is for the nation to buy on credit those things that it actually needs when times are bad and workers are plentiful and labor is cheap but then to always pay the debt down as soon as times are good. We’ve never done the latter part of that equation! Keynes idea was never, as you say, a longterm financial plan.

          I think the Fed will now find it has raised interest as much as it can. Interest is already appearing to hamper housing just a little. They will also find sometime after they start unwinding their balance sheet that they couldn’t do that either.

          Your statement on the Fed losing control over interest received good verification when the Trump Rally started going. Interest began rising before the Fed even made its rate increases because market dynamics started taking over ahead of them as investors started speculating that Trump’s large infrastructure spending was going to require a lot of financing, which would drive up interest as the government went in search of financiers.

          • Kim

            Yup. That is a perfect example of how the FED, and all other central banks, actually doesn’t have control of the most important aspect of the financial system: interest rates. It’s ironic because this body establishes the daily funds rate.

            Thank you, sir, for this article! Hang in there and keep writing. 🙂

  • Steve

    Ok citizens….It is different this time…Just like Japan the US FED has a trading desk with 4+ Trillion in assets and a lot of it in stock ETF’s. Yes folks they own a lot of ETF’s and maybe as much as 50% or more of the market. Unless they unload their position and crash this country’s Pension Plans..well this market is up to stay…mostly. This is news you won’t hear.
    But in Japan they do tell their positions.
    Just as insane, the central bank of Japan ownes about 60% of Japan’s domestic ETFs as at the end of June 2017. This is up from just over half as of a few months ago suggesting that the BOJ is still gobbling up equities at an unprecedented pace.
    Keep the game going folks. Every asset is manipulated.

  • Robert Hampton Burt

    One of the best articles I’ve read on the subject.

  • Chris P

    Everything will be done to make sure the market doesn’t crash! The pensions and insurance companies and banks would all have to go down if the market goes down. No government around the world lets their market go down anymore for several reasons. There will have to be some big unknown event or like you have said before they try to take Trump down but I believe that won’t be until 19 before the coming election to make sure no Rhino gets in.

  • Gordo

    I hate to piss on the party but it has already crashed. While the DOW soars, the value of the dollar plummets, what we are seeing is a dow adjusting for the deflation of the dollar.

    • Hi Gordo. As all value is relative, what else is the dollar plummeting in relationship to so that we can know that stocks are not going up but the value of the dollar is falling? It’s doing pretty good against the euro, going like gangbusters against the Canadian dollar, and treading water against gold.

  • Stan Hankins

    The titanic is unsinkable. God can’t even sink the titanic. All ABOARD!!

    • Did someone say “ice?” We’ll have ours crushed …

      … and then raise a glass to all the unsinkable endeavors of mankind!

  • QEternity

    No doubt the crash comes. The question becomes one of what extraordinary machinations our monetary mandarins will attempt to keep all the balls juggling — and much further will it distort the crash?

    • Indeed. That is the biggest unknown for me: how long can will they keep TRYING to keep all the balls up in the air or all the plates spinning and will they run out of ability before they run out of the will to keep trying. Will they reduce their balance sheet this year because they foolishly believe in their fool’s recovery, or will they reduce it this year because they’re running out of energy and they’d rather it crash, IF its going to, on the Donald’s watch so they have a suitable scapegoat? If they do keep trying to prop their house of cards up as they start removing cards, how will it distort the crash to make it different from the other that have preceded it because THIS TIME it happens with a Fed that has already experimented with QE and that has already discussed going “negative” with interest? With central bank responses being quicker and different because of their new familiarity with such peculiar programs, what will a crash of their own propped stock market look like IF they wish to continue propping their recovery along?

      This time IS different, but no doubt the crash (of some kind) comes anyway. There are enough icebergs, and the Titanic has enough built-in, hidden flaws that the crash and some form of sinking are inevitable. But this time the Titanic has a different set of lifeboats. It doesn’t seem to have radar yet to help it avoid icebergs, and it’s staff are not any better than previous staff; but the musicians who sing along with them while the ship is sinking are just as determined to keep singing, even when the ship is going down. Therefore, the lack of foresight, the group thinking of the staff, and the willingness of the media to play along are all about the same. The coal bins, they say, are loaded with a lot more coal this time. (banks have higher reserves), so that should help her keep traveling when she does get a hole punched in her side.

  • Omar

    Absolutely, you can’t have a real bear market unless at least 50% of the market believes the market is a buy on the way down, so that they keep averaging down. They don’t realise they’ve dug a hole for themselves until it’s too late. Flash crashes like 1987 aren’t bear markets.

    Also there are always different reasons for the severe bear markets, although clearly debt is always involved, because we are, after all, money economies. We are double entry economies and on the way down, the debit side comes up because of negative wealth effects and margin calls.

    This particular (coming) bear market has four important aspects (i) The Fed debt is what everyone is worried about and are focusing on. Yellen and co. have played the game and convinced everyone everything is under control. That’s easy to do using the arguments based on a business as usual world, in which the US dollar is supreme and the only safe haven which the Fed can go on printing with impunity. But things aren’t business as usual, because the US Dollar is losing a huge amount of ground in world trade. Read Stephen Roach [https://www.project-syndicate.org/commentary/developing-countries-drive-global-growth-by-stephen-s–roach-2017-04?barrier=accessreg] to understand the fact that the US currency is fast losing its share. (ii) The US Russian sanctions will exacerbate this, and very fast, because Russia is desperate to speed up its own payment system. The US Iran sanctions have, and will continue to drive oil trading into Yuan, which the Chinese in turn are capitalising on by insisting now that the Saudis also switch to Yuan. (iii) All plays into the long-term decline of the West, essentially caused, not by punitive taxation on the people of the “free world” by awful state governments, but by the effectively very severe punitive taxation rising out of the rent-seeking activities of the financial sector. All these are “nested” reasons that will blow the markets apart (iv) Then you have the fuse for the bomb: the vacuous Trump rally with empty infrastructure promises, and a US President who isn’t actually governing or leading the country (let alone the free world) in any way, simply tweeting (as David Stockman writes) from the White House attic, whilst half his appointments aren’t even made. The match for the fuse? The inevitable political nuclear explosion of some kind of impeachment process, or even serious threats thereof. Washington DC, centre of the world:…. a place of devastation.

    • That makes sense. People can’t sell if there aren’t buyers on the other side. So, there have to be some buyers who are ready to help take the market down.

      Without a doubt the dollar is losing tactical ground. Russia and China are working together to break the petrodollar, and they seem to be making some progress with that. Our sanctions against Russia certainly accelerate that move by helping to force it. And, as you say, Iran with all it’s oil is more than determined to participate in ending the petrodollar. The petrodollar doesn’t seem to be going down easily, given how many major oil suppliers and buyers want desperately to do away with US hegemony, especially in that field; but it is giving way, and we’re helping it with all of our sanctions, which politically haven’t accomplished much that I can see.

      And, yes, you almost have to conclude the Donald is not the leader he claimed to be, given how significant the turnover is in White House staff that he hand-selected. The buck stops with him. They’re his staff, whether he chose to keep them on from Obama or are the one’s he approved from the staffing team he created. That makes the leaks his problem due to his very bad staffing choices. And with Goldman Sachs at the helm of so many offices in the Administration, there is no possible way Trump could turn out to be good for the middle class. He has INTENTIONALLY created a government RUN BY BANKSTERS! Yet, people keep believing in him because they want a champion, and he has a mouth that claims he is one.

      This year is chugging along just as I said it would last year, with the Trump rally proving itself to be vacuous, as you describe, as none of the infrastructure promises materialize. I’ve said some of those promises will materialize eventually along with some tax changes, but that they would be a long time coming due to the dysfunctional infighting among Republicans that is inevitable due to 1) the party’s huge divide between status-quo, pro-establishment politicians and tea-partiers and 2) Trump’s penchant for inspiring infighting with his inflammatory mouth and his apparent love for stirring the pot into chaos. He’s far from being the uniter that would be necessary to turn this factious Republican caucus into something that could actually govern. For those reasons I’ve maintained all along, like you, that the tax and infrastructure changes will be too little, too late when they do come to keep the economy from crashing.

      So far, this train wreck is right on schedule with the first really visible break-up cracks in the economy showing this summer in obviously flagging auto sales (that are a secular change in the market), a guaranteed retail apocalypse starting to now actually show itself, and possibly the turning of the housing market (still not clear if that is happening, but it’s showing signs).

      • Omar

        The key point is that it’s huge battle and it isn’t really just about the Petrodollar. You were mentioning elsewhere about balls in the air and plates spinning, but this isn’t the Fed on its own, it’s Fed+BoJ+ECB+BoE+Bundesbank trying to keep things going. Stephen Roach’s article is important because it describes how international trade as a whole has changed (1) the West is now in the trade minority (2) the neo-colonial spoke-and-wheel system is collapsing as the non-West can easily source the vast majority of its needs from non-Western nations. The BANKSTERS are in charge everywhere because they’re the only ones who can keep the illusion going – borrow from the central banks – pass the money through the markets – take their cut – then pass it all back into the Western Treasuries in a never ending carousel. Government bond markets are seeing fast dropping Chinese and Saudi involvement – its all now smoke and mirrors.

  • It was a banking crash primarily, wasn’t it? And aren’t banking arrangements different now – no gold standard, electronic money creation at the push of a button, bail-in legals prepared, etc?

    • It seems to me 1929 was equal parts banking collapse and overall stock-market crash — just like 2007-2009 was equal parts banking collapse and housing crash; but that still wound up quickly crashing stocks with the familiar patterns noted above — and that happened in a time with no gold standard, electronic money creation at the push of a button, and the biggest bail-outs ever known. So, maybe next time it all happens with the biggest bail-ins. (Or maybe not, as I suspect the stock holders and others will still manage to get some bailout money. I doubt we’ve seen the last of such efforts.)

      As they say, history never exactly repeats itself; but it definitely rhymes. Next time will be different still as to what causes the crash, but the patterns of a crash are remarkably similar and appear to be all in place and are as likely to consume the stock market as earlier crashes — some of which originated with stocks (dot-com bust), some with housing, some with bank failures. No matter which card you pull first in a house of cards, the whole thing comes down.

      –David