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It’s the 1930s all over again but with a twist

the great recession or third depression

“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 Jones Industrial Average is repeating a pattern that appeared just before markets fell during the Great Depression, Daryl Guppy, CEO at, 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.

In the European markets, Guppy says Frankfurt’s Dax is witnessing a different pattern to London’s FTSE.

Guppy uses the broad trading band as measurement- giving the Dax a downsize target of 1,500. The same head and shoulders pattern seen in the Dow can also being seen in the FTSE, he added. Source

This time it’s different

The Federal Reserve isn’t doing what they did in the 1930s. Instead of deflation we’ll see hyper inflation. That’s why they don’t want the banks to tighten the borrowing which is what caused the great depression (not the stock crash itself) in the first place. This time around the central banks will inflate and cause similar results to the great depression except it will be that whoever has savings in the banks will loose it due to inflation. Anyone working will barely make ends meet and poverty will end up being similar to that of the 30s but with prices rising instead of falling. On the other side of the coin, Elliott Wave International has a different opinion:

Jim Puplava: Bob, I want to pick up from last September. Since then we’ve had several quarters of positive economic growth. Asset classes rose substantially, CPI turned positive, gold has hit a new record, oil is close to $80 a barrel. I guess a lot of our listeners would like to know, have these events altered your views on deflation?

Robert Prechter: No, because we forecasted these events, and we forecasted them at the bottom in March and April of 2009. On February 23 in the Elliott Wave Theorist, I said that we were almost at the bottom; that ideally the S&P should get down in the 600s before turning up; and that the Dow was going to rally from that low up to about 10,000. We put that target out a few days after the low. The main thing we said at the time was that it was going to be only a partial retracement, in other words a bear market rally. By the end of it, we said people would be bullish on the economy, there would be positive economic numbers, investors would think we have made the turn, the Fed would take credit for having saved the financial system, and there would be optimism across the board. All of this has happened. And going into April 2010, few people in the fundamentalist or technical camp were looking for a downturn.

The final thing I said was that Obama’s popularity would rise into that peak, and on that one I was wrong. His ratings couldn’t even bounce during that period, which I found very surprising. But both Obama and George Bush’s popularity trends followed the real value of stocks, not the inflated dollar price of the stock market, which I find interesting.

As far as inflation and deflation go, we had deflation during the down cycle in 2008. Commodities fell hard, the stock market fell hard and real estate fell hard. But the recovery that we were looking for in the first quarter of 2009 was expected to be a reflationary, and it was. You saw a decline in credit spreads. You saw a rise from the lows in commodity prices and stock prices. All of that is perfectly normal. These are just waves ebbing and flowing. But the long-term trend is still down, and as this cycle matures we are going to see more and more evidence of deflation. To read the entire conversation, access the 20-page report here.

Canadian situation dire

Most Canadians would not bet on a mild recession in Ontario with all the layoffs in the auto industry. This is what the banks would like to have you believe. Their economy is going down the toilet with the Americans. Don’t let any Bank or politician deceive you. Domestic car and truck production will never recover as American’s are over extended and they can no longer borrow money from their home equity lines of credit as they have in the past.

Also, they cannot compete with the imports. More and more vehicles sold in North America will come from Korea, China or India . Much of our manufactuirng base is being shipped off to China and other low wage countries due to globalization. They can no longer compete unless they build cars for less than minimum wage. Thank Free Trade and Globalization. In the coming years, we can expect to work harder and longer holding two or three jobs with few benefits just to make ends meet. This is our future folks .We will be nothing more than slave labour! This is very sad

Remember how the Canadian banks had no exposure to sub-prime mortgages. And then – “Oh, sorry. We forgot this. . . But otherwise the fundamentals are sound.” Then, a couple of months later – “Oh, sorry. We forgot this . . . But otherwise the fundamentals are sound.” And again and again. And, now, we’re supposed to trust them.

Where are the central banks getting this money they are lending out to the charter banks? Well, they are creating it. And what does that ‘created’ money do? Well, when it’s greater than the growth of the economy, it creates inflation.

Let’s face it. This is not about the American sub-prime mortgate crisis. It is about the enormous debt that the American government has sustained (partly, though not entirely, on their foreign military adventures), the enormous American trade debt and the enormous American domestic debt. Through financial jiggery-pokery the central banks have contained those debts until they exploded. Sub-prime mortgages were just the first salvo.

Low interest rates will keep inflation down for only so long. As inflation increases, wage earners will be blamed. Interest rates will be increased to create unemployment and further reduce wages. And who will be able to pay their mortgages, then? The credit card debt in Canada will also collapse. Huge defaults will occur. And who can buy anything from anybody if they don’t have any money? That, my friends, is a depression. And no matter what lies the charter banks are spouting this time, it is going to happen. They cannot lie their way out of this one.


  1. David Jeremiah David Jeremiah July 6, 2010

    Since the Fall of Communism in 1990, 3.5 Billion Workers of all levels have been unleashed into the Market. Industry and Work were simply engulfed by China and India. Commodities will go up. Salaries will Go Down. Cost of Living Will go Up. The Government is thinking of Self. The Corporates are Thinking of Shares and Profits. The Workers will be Smothered. Bye Bye Democracy. Bye Bye Capitalism. Bye Bye Family. Bye Bye America. Hello The New World Order. Don’t Cry for me Fidel Castro !

  2. Mark Mark July 7, 2010

    so when .. if its so precise to the 1930 backlash….this year?

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