When to be Fearful and when to be Greedy
Professor and author Robert S. McElvaine, in his June 2009 Introduction to the 25th edition of his seminal work The Great Depression, strikes a triumphalist pose. He is a historian and “not an economist”, he tells us, and he was “not among” the experts who failed to see that the country was “riding an unsustainable credit bubble” or that conditions in 2008 were “very similar to those of the 1920s.” Indeed, “in the summer of 2007, I completed an analysis of the similarities” between these two time periods, “predicting a collapse.” And what a prediction it was, given that the S&P 500 would lose more than 50% of its value from October 2007 to March 2009, a 17 month bear market. Moreover, in addressing the question “is it happening again?” McElvaine reminds us of Mark Twain’s aphorism that “History doesn’t repeat itself, but it rhymes” and states that this saying “seems particularly appropriate when discussing the Great Depression in the period after the Fall of 2008.” For example, the “end of the twenties economy made a terrible crashing sound and the falling economy of 2008 made very similar noises.” Finally, he warns that “as I complete this new introduction in 2009, fears that the new economic collapse may prove to be of monumental proportions are even greater than they were” during the deep recession of the early 1980s. In short, be afraid, be very afraid!!