Hoover on the Recovery
By Barry Ritholtz - August 16th, 2009, 4:15PM
A few good quotes:
“The spring of 1930 marks the end of a period of grave concern…American business is steadily coming back to a normal level of prosperity.”
– Julius Barnes, head of Hoover’s National Business Survey Conference, March 16, 1930“While the crash only took place six months ago, I am convinced we have now passed through the worst — and with continued unity of effort we shall rapidly recover. There has been no significant bank or industrial failure. That danger, too, is safely behind us.”
– Herbert Hoover, May 1, 1930
Tweet
Facebook
Reddit
Digg this!
August 16th, 2009 at 4:37 pm
Which naturally goes to show that the men and women who so fabulously fixed the financial system into the amazing refurbishment it is today, and made it safe for investors and investment, should now be entrusted with a new, expensive, undefined, government health care system.
August 16th, 2009 at 4:38 pm
“While the crash only took place six months ago, I am convinced we have now passed through the worst”
the people paraded around on the MSM are not very bright if they can’t understand that now is not like anything since the great depression and can only be compared to the GD- sure have had BB doing everything ever thought of to contain deflation- but- consumers will have the last word on that
August 16th, 2009 at 4:38 pm
Or, to put in another way, you can do wonders with people of good intent and a coat of paint.
August 16th, 2009 at 4:40 pm
BB pulled a “Hoover” when he announced an end to quantitative easing. A big mistake.
August 16th, 2009 at 4:41 pm
BSNEATH Says:
August 16th, 2009 at 4:40 pm
BB pulled a “Hoover” when he announced an end to quantitative easing. A big mistake.
reply:
————-
Agreed, a gallon of paint and a bucket of money.
August 16th, 2009 at 4:48 pm
dead hobo Says:
August 16th, 2009 at 4:37 pm
Which naturally goes to show that the men and women who so fabulously fixed the financial system into the amazing refurbishment it is today, and made it safe for investors and investment, should now be entrusted with a new, expensive, undefined, government health care system.
I should have said:
————————————-
Which naturally goes to show that the men and women who so fabulously fixed the financial system into the amazing refurbishment it is today, and made it safe for investors and investment, should now be entrusted with a new, expensive, undefined, government health care system THAT WE NEED RIGHT NOW OR WE WILL SEE THEN END OF THE WORLD IN THE MOST HORRIBLE WAY … PASS THIS BILL TODAY AS IT IS … THIS IS A CRISIS THAT CAN’T BE WASTED!!!!!
August 16th, 2009 at 4:52 pm
There is a lot of uncertainty right now regarding the economy, and some consolidation is to be expected. But the market is moving higher and it is worth using market timing signals to take advantage of both up and down days.
Many sites provide such signals (just search Google). For example, http://invetrics.com is providing free DJIA trading signals to registered Bronze members. They are up 47% this year and worth checking out
August 16th, 2009 at 5:16 pm
Congrats “michaeld” for the shameless self promotion…
Now here is a link to my fruit stand…
August 16th, 2009 at 5:47 pm
Who is going to be the one to pull an “FDR” that keeps us in the crapper for a decade?
August 16th, 2009 at 5:58 pm
dead hobo Says:
August 16th, 2009 at 4:38 pm
Or, to put in another way, you can do wonders with people of good intent and a coat of paint.
*******************
Case in Point: Bush’s Ownership Society is now Obama ‘s Rentership Society because they apparently came to sobering realization that trying to miraculously restore peak real estate values just ain’t gonna happen in Obama’s first term time for new coat of paint with sloganeering to sell the rubes some more hope and change.
President shifts focus to renting, not owning
Using $4.25b to build affordable housing
Globe Staff / August 16, 2009
http://www.boston.com/news/nation/washington/articles/2009/08/16/president_shifts_focus_to_renting_not_owning/
August 16th, 2009 at 6:36 pm
It would be useful at this juncture to see who in fact is declaring victory, or a new Bull market, assuming that is the measure. JPM comes to mind.
@km4
The gov should convert all the underwater Fannie/Freddie mortgages to a rent to own model and they would not have to build a thing.
August 16th, 2009 at 7:46 pm
Just shows that politicians haven’t changed that much. Just because you say it, doesn’t mean its so.
You would think that if politics was your profession, you would be a scholar of it so one could avoid repetitious tom-foolery.
August 16th, 2009 at 7:50 pm
I hope michaeld is blocked from this site…. keep your advertising on google.
August 16th, 2009 at 7:53 pm
More fun! Someone in Joliet IL historic society has actually scanned headlines from fische! Check these gems out!
http://www.jolietpubliclibrary.org/Digitization%20Projects/The%201930s/Depression.htm
If you didn’t know the date, you would think they were recent… some of it is uncanny–teachers and municipal workers getting I.O.U.s (sound like California a little?)
August 16th, 2009 at 7:58 pm
Did you see Hoover reduced his salary?? It’d be a cold day before any of the politicians did that now…
How about Babe Ruth taking a salary that was below what his salary was from 1923-25!! Hmm…yet Eli Manning is getting his gravy. We are in a different time and the pain hasn’t hit in full yet…
August 16th, 2009 at 8:03 pm
mcHAPPY
I second that!
JasRas
No kidding. You would certainly think they’d be more aware of the history of things to avoid foot in mouth disease. But most all of them are far too arrogant and self absorbed to do so. They’re (and by extension, we’re) the exceptional ones that couldn’t possibly learn anything from history and our forefathers. They’re also too busy entertaining the lobbyists and figuring out how they’re going to cash in on their public service. It’s amazing how many of them come out of decades of holding public office and are rich. Hmmm, how’s that work?
August 16th, 2009 at 8:06 pm
JasRas
Yep, the more things change, the more they stay the same. It is uncanny how things rhyme.
August 16th, 2009 at 8:22 pm
There are many similarities between the Great Depression and this one. The biggest difference between them however, is the substantial intervention by the world’s central banks. Therefore, we can’t predict how this one will play out until it has run its course. And in the meantime, we can place our bets based upon deductive reasoning.
August 16th, 2009 at 8:23 pm
It appears that the Brother who would be Pres is now backing off the public option health-care idea due to the fact that the proposal really pissed off the wealthy corporate sponsors who put him into office in the first place.
Now there is the kind of appeasement we can all believe in. Hail, Caesar!
August 16th, 2009 at 8:48 pm
I’m sure many of you have seen this, but this is a good time to look at it again. Along the same lines as the Hoover quotes.
Pat G. You’re absolutely right that there are differences between the Great Depression and today. However the key factor is that this simply has to play out. The worldwide interventions are merely delaying the inevitable. We must deleverage. This is like a forest fire. It’s horrible, it’s devastating, but when it’s over it eventually promotes new growth.
http://www.gold-eagle.com/editorials_01/seymour062001pv.html
August 16th, 2009 at 9:03 pm
deleveraging can be attained by paying down debt- or- better yet-
walking from debt- the dream was shoveled down people’s throats- for the benefit of the advertisers, bankers and trinket makers-
there is no shame to say- hey- i was taken in- but fuck ‘em- I’ve seen the light-
the banks are ultimately responsible for all the mess we are in-
you can not pump up debt to the stratosphere and expect people to follow through on their “agreements”
August 16th, 2009 at 9:07 pm
I have heard but can’t confirm that there is substantial university type research that indicates that governmental intervention can have a short term affect, but ultimately does not affect the final destination, only prolonging the arrival.
August 16th, 2009 at 9:09 pm
@Iguanadon
However in the end, there is one significant overhang that this depression will have to address that the other didn’t: the effects of worldwide quanitative easing.
August 16th, 2009 at 9:18 pm
@ahab: Jingle mail can’t be socially acceptable for hotels and other corporations but not for the individual. I’m with you. The only way to play ball with these vultures is to play the game like they do. God forbid, if I ever get put in that position, I will fuck over the banks before even giving it a second thought.
August 16th, 2009 at 9:32 pm
Catch-22.
Our FIRE economic model is totally dependent on the creation of new debt to function yet we are in the midst of the greatest episode of debt destruction in history with its corresponding loss of jobs and declining incomes. The only possible recourse to bail out the sinking ship is for government to take on the role of consumer – but the government cannot raise taxes on the already defeated public so must try to sell more debt around the globe.
That is the real driving force behind the switch from Bush’s “ownership society” to the new “rental society”. When you are a Banana Republic, only the ruling class gets to own.
August 16th, 2009 at 9:52 pm
Looks like someone gave the “sell” signal in Japan this evening/morning. Hhhmmm, I wonder if the coming selloff (the most anticipated one in recent memory) in the U.S. markets might happen before the fall and fake a lot of us out as Mike in Nola theorizes?
August 16th, 2009 at 10:23 pm
@Mannwich 9:52 pm
I remain of the opinion — just gut feel — that this “event” will continue to operate in slow motion, with things moving to wider extremes, but doing so later than (almost) anyone believes. It will be very easy to correctly anticipate something, and yet be so early on the timing that you suffer major whackage before you are “proven” correct.
Be very careful out there. This market is not anyone’s friend (except Goldman Sachs).
August 16th, 2009 at 10:23 pm
Winston, you’re missing it. Government doesn’t need to sell debt around the globe. It only has to sell it to the fed. They can print immeasurable amounts of money. They can stave off any deleveraging they want. There is but one condition. That people continue to be gullible enough to take their worthless paper
If and when that ends, the game is up. At this rate it doesn’t look like it will ever end though
August 16th, 2009 at 10:25 pm
@constant: You and I are on the same page there. A short time ago, I made a very similar point on another thread today. I’m mostly sitting tight and playing very small and not very often.
August 16th, 2009 at 10:55 pm
@Common Man 10:23 pm
“… Government doesn’t need to sell debt around the globe. It only has to sell it to the fed. They can print immeasurable amounts of money. They can stave off any deleveraging they want. There is but one condition. That people continue to be gullible enough to take their worthless paper”
And that’s why they have a Problem — if they print money to buy Treasury debt, the dollar collapses and makes what buyers there are even less willing to buy. That path leads straight to Zimbabwe, and everyone knows it.
So we have silly head fakes, diversions and delusions, because the Powers That Be do not have the knowledge, the confidence, and the spines to do what needs to be done, which is restructuring the US financial system, from top to bottom, eliminating the leaching of integrity and trust that is destroying the system and allowing the blood-sucking vampire squids in government and industry to destroy the system.
Only when the Powers That Be are willing to rip the vampire squids off our collective faces, and restore rationality in rewards of all kinds — no more outrageous compensation, no more crazed gambling with unlimited leverage, and no more “extra lives” (when a company is dead, it dies) — then we will be on the path to recovery. Until that time, we will continue to follow the Japanese (who are still on course for lower ground, as they have not done these things either).
Sure, the Hamptons crowd will continue to live the high life, but year after year, there will be fewer and fewer of them and eventually the entire system grinds to a halt (or arrives at a state where social unrest and violence from the masses brings about a new state of affairs).
August 16th, 2009 at 11:08 pm
How the Common Man Sees It wrote, “Winston, you’re missing it. Government doesn’t need to sell debt around the globe. It only has to sell it to the fed.”
As ConstantNormal replied, it ain’t that simple. Anyway, I’m pretty certain you were simply being sarcastic. We all know that foreign demand for treasuries is all that sits between the U.S. and Dante’s Inferno.
August 16th, 2009 at 11:22 pm
Come on Barry, just post the whole thing again:
http://bigpicture.typepad.com/comments/2006/11/19271933_chart_.html
I think the whole swine flu mess will make this depression worse. That’s why I’m long NVAX until its hits $30
August 16th, 2009 at 11:37 pm
[...] http://www.ritholtz.com/blog/2009/08/hoover-on-the-recovery/ Posted in Econ & Finance, Politics « Even The Lib Bloggers Are Struggling To Figure This One [...]
August 16th, 2009 at 11:40 pm
Banks, which supposedly are recovering, may be in more trouble than we are being told: http://contraryriches.blogspot.com/2009/08/banks-in-trouble-all-around.html
August 17th, 2009 at 12:31 am
We all know it isn’t that simple. I’m going by what their actions are. Not by what they say they believe or even what they say they do. The fed has shown a perfect willingness to buy every debt instrument on the planet and people have shown a perfect willingness to sell those debt instruments for paper dollars on the assumption that both are worth something. Maybe that is it. They are both worthless so it is a nothing for nothing deal.
I guess the confusing part is that people must be taking those worthless dollars and trading them for something of tangible value. I can’t see them holding the paper for long. So the real dupe is the guy who gives up real assets and labor for the paper. I assume he wants to dump it off before the music stops as well.
So everyone is passing around the hot potato and no one wants to be stuck with it when the music stops (to mix metaphors). The question is when is the music going to stop?
August 17th, 2009 at 12:49 am
@cvienne
5:15pm
“Now here is a link to my fruit stand…”
FYI, I spent the last hree hours searching fruitlessly for your link – WHAT up man….
Not to worry though the money I save NOT buying stuff at your fruit stand, is going straight into my 401k.
So it looks like you will be the big losser in the end.
August 17th, 2009 at 1:32 am
Hasn’t it always been worthless paper? So what changed? As long as the majority want to believe that the paper they hold means something we will just keep chugging along.
Oh yeah a lot of people are pissed, including me, but I haven’t seen anyone throwing their dollars or yen or whatever in the trash. Yeah, like China doesn’t have a few issues of their own or everyone else for that matter. So how do you replace 20~25% of the economy of the world overnight? You don’t.
Sorry for those that so blindly trusted their models and dogma that those models and dogma fail to hold water sooner or later. Something about the human instinct to survive. May I ad, in spite of dogma.
August 17th, 2009 at 2:15 am
Mannie: Thanks for the acknowledgement, though I can’t say I have a lot of confidence in my prediction. It could just as well be as constantnormal says, with it being strung out a long time because of the interventions.
Looking like a good day for our US Treasuries. Shoulda bought more a week ago. Well, I guess everyone feels that way.
August 17th, 2009 at 8:58 am
basquebob Says: August 17th, 2009 at 1:32 am
Hasn’t it always been worthless paper? So what changed? As long as the majority want to believe that the paper they hold means something we will just keep chugging along.
No, it hasn’t. Once upon a time(only 30 years ago) it was convertible into gold. What changed? The government changed the rules in favor of their bankster buddies because they thought the gold backing was too restraining on their plans for world domination
As long as the majority want to believe that the paper they hold means something we will just keep chugging along.
Isn’t that what I stated above? As long as the fed prints and as long as people accept that the paper has value, the confidence game continues
Oh yeah a lot of people are pissed, including me, but I haven’t seen anyone throwing their dollars or yen or whatever in the trash. Yeah, like China doesn’t have a few issues of their own or everyone else for that matter. So how do you replace 20~25% of the economy of the world overnight? You don’t.
Actually most people who have a lot of cash do trash it. That is also what I stated. They trade it for tangible goods asap. They do this because they know instinctively that those dollars are losing value so they want to get value for them. I try to trash as many dollars as possible as soon as possible by converting them to stock.
And no, a currency doesn’t usually die overnight but you would be shocked at how fast it can become worthless. After all, it is backed by the ‘full faith and credit’. The minute that backing is taken, and it can be taken with the stroke of government’s pen, then it is worthless. Just study up on the history of fiat currency to see
August 17th, 2009 at 10:03 am
“We have a lot further to go. As far as I’m concerned, we will not have a true recovery until we stop losing jobs… We have a steep mountain to climb, and we started in a deep valley”
Is not quite…
“While the crash only took place six months ago, I am convinced we have now passed through the worst — and with continued unity of effort we shall rapidly recover. There has been no significant bank or industrial failure. That danger, too, is safely behind us.”
What?! I’m just sayin’…
As fascinating as the unprecedented financial clusterfuckalypse and all of its implications are, when taking into account the fact that I have two beautiful young sons to nurture and protect , I become viscerally angry and anxious.
Are there any precise indicators out there that will help us see the need to actually flee ahead of time?
Who specializes specifically in constructing bunker type structures? Moats, etc?
Are the CEOs who have been selling stock in their own companies in record numbers purchasing homes in isolated areas? Buying M134 Miniguns?
Anyone?
August 17th, 2009 at 1:17 pm
To the Common Man: Gold is just like paper, people agreed a while back to make gold the tradeable and valuable thing before that they had copper and in other societies they had arrow heads. The $ has lost 93% of its purchasing power since 1907 and here we are making sterile arguments. The government can do with gold as it wants and does with other things.
People trash the dollars by buying things but it is funny how what it buys turns into trash real quick too: real estate being the case in point.
Talk about reading about reading history.