DIRE DOW – AT 8:19 A.M. ET:  We are getting a number of new stories cropping up comparing our current economic situation to that just before the Great Depression.  The one bright spot in the economy over the last year has been the stock market, but it is starting to soften.  From CNBC:

The Dow Jones Industrial Average is repeating a pattern that appeared just before markets fell during the Great Depression, Daryl Guppy, CEO at Guppytraders.com, told CNBC Monday.

“Those who don’t remember history are doomed to repeat it…there was a head and shoulders pattern that developed before the Depression in 1929, then with the recovery in 1930 we had another head and shoulders pattern that preceded a fall in the market, and in the current Dow situation we see an exact repeat of that environment,” Guppy said.

The Dow retreated 457.33 points, or 4.5 percent last week, to close at 9,686 Friday. Guppy said a Dow fall below 9,800 confirmed the head and shoulders pattern.

The Shanghai Composite is seeing a very rapid collapse, falling below 2,500, which suggests the major fall in the Dow, he added.

I've never believed that history repeats itself.  I do believe that the psychology of history repeats itself, and indeed there are some chilling similarities in the psychology of today and the psychology of the early thirties – especially the growth of fear.  You hear it and sense it everywhere. 

If the stock market tanks again, the effect could be far worse thatn 2008 because the nation has nothing to fall back on.  The federal government is deeply in debt, and the states are out of money.  Indeed, if the Dow heads south, tax revenues to New York State, which is already in deep trouble, will be sharply reduced, and the state can essentially collapse, joining good buddies California and Illinois. 

Ah, that Obama leadership.  Aren't you inspired?

July 6, 2010