The Coming Great Crash?

Galbraith Great Crash

I fully understand that there are now so many calling for a Great Crash of all time as they have during each correction, big and small, for over 30 years, and they just never get it right, even once. Some tout the rise in interest rates. Others look at this chart and nothing else. If there is a Great Crash, then the dollar rises, for you are selling assets for cash. They overlook the fact that in 1929, the US had a balanced budget. The world was buying dollars because Europe defaulted on its debt, which rippled through the financial system, causing 9,000 US bank failures in the United States just as the Mortgage Crisis in the US hit European banks.

So, if there was a Great Crash, does that mean you want to sell all tangible assets, from stocks to real estate, and go to the dollar and government bonds? Is that what you really want to do with Biden throwing money out the window in every direction BUT the domestic economy?

US 1920 1950

FED Interest Rate 1929 1932Most of these pretend analysts only look at the chart of 1929 and keep predicting a 90% crash. The dollar went up from 1929 into 1931 when the Sovereign Debt Crisis occurred. I had to read The Great Crash in high school. It was not until I found a copy of Herbert Hoover’s memoirs in an antique bookstore in London that changed my life.  Nowhere in Galbraith’s book was there ever any mention of a Sovereign Debt Default because, like FDR, they were trying to see Marxism and blame everything on the private sector, so the government was the promised land.

Between 1929 and 1931, you sold private assets and moved to cash. However, look at what happened when the Sovereign Debt Crisis hit in 1931. The dollar fell with the stock market into 1932. People did not want either and assumed that most of Europe defaulted on their debt, so surely the US would be next. The fall in the dollar meant GOLD declined since there was a gold standard. Roosevelt was elected, and then he CONFISCATED gold BECAUSE he planned to devalue the dollar to inflate his way out of the Depression.

Most of what you hear about the coming Great Crash is distorted history. Some tout rising interest rates. Well, the Fed lowered rates from 6% to 1.5%, and it did NOT support the market. In fact, as always, the Bull market into 1929 took place with rising interest rates. When Trump took office, they called it the Trump Bull Market, and the Fed raised rates throughout his administration.

There is a lot more to this than superficial analysis. We will include a detailed review at the WEC.

Hoover QuoteWEC_2023_Sovereign Debt Crisis

 

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