Yes, The Nut Cruncher…

As I said before in my blog on ‘Australia is Doomed’, I like Steen Jakobsen, his eyes are opened.

Now that he has commented on the “zero” outcome, I will finish the ‘Depression is Coming’ series. Please note that everything Steen has said in his post, I have covered in this Blog.

It is just that certain peoples pride and own self-belief and ambition, cloud their judgement and they feel that they need a secondary source to confirm the inevitable.

“We have zero growth, zero inflation and zero hope.”, a gloomy outlook from Saxo Bank’s Chief Economist Steen Jakobsen but based on his recent global travels meeting business leaders and key investors whose shared negative outlook was striking.

Steen outlines his predictions of a crisis correction, the only outcome of a zero environment in his opinion. Steen believes a Fed hike will act as a margin call on the global economy, “Expect the Federal Reserve to issue a margin call on asset inflation in June or September, a Grexit, and a much stronger US dollar (EURUSD at 1.10) in a final move where lack of liquidity and shortage of access to USD funding will create a “mini-crisis”.

So all you doubters in Wonderland, please remember history, in that the last Great Depression there were two US stock market crashes,

That was the ‘nut cruncher’ and yes, history will repeat… the Bond bubble burst and then the stock market crash began on October 24, 1928. The crash came on October 29, of that year…..Black Tuesday. Losses for both the Bonds and Stocks were an astronomical sum in those days.

Thereafter investors, with what capital remained went back to the stock market, as the perception by everyone was that the worst was over with industrial stocks having lost 80 percent of their value since 1930 and over 10,000 banks failing.

International trade slumped to one third of the pre-crash value with unemployment rising to 23.6 percent.

It could not get any worse, the perception was that the bottom was in.The then Government passed the Federal Home Loan Bank Act and the Glass Steagall Act of 1932.

What everyone seems to forget about was the second stock market crash in 1932. This crash, was so huge that the crash of 1928, (Black Tuesday) paled into insignificance. There was 50 percent depreciation, even from the lowest point of 1929.

Everyone suffered ‘Minski’ moment, when there was no asset value left.

The drop was so massive, that it just dissolved every bit of profit that the stock market ever had. It would take almost 30 years for the US stock markets to gain that peak.

Yes I know this is history, one however should not discard the fact that, as we never learn. Our own self confidence and pride gets in the way of a good story.

“So the story of man runs in a dreary circle, because he is not yet master of the earth that holds him.” Will Durant

Looking at the global situation, this mess will not start in the US.

It has started, as it did in the Great Depression in Austria with the Heta Bank, the Austrian Government has taken a strong stand on the issue of the exposure to Heta. What one must bear in mind though, is that Heta is not the only Bank, Insurance or Re-insurance company involved or exposed in cross currency investments.

Then we have the perpetual rise of the Chinese and Hong Kong Stock Markets, this against a backdrop in China of far lower manufacturing and increasing unemployment.

It will bust, it will be a contagion and wild fires are hard to stop.

When it does, your left nut will be crunched, then the quiet before storm to put your second nut on the chopping block. Suet?


5 thoughts on “Yes, The Nut Cruncher…

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