A few days ago, I read a fairly typical don’t worry, be happy article on CNN by Paul La Monica.

After perusing it for a while, and I shook my head, and thought, “Moron”, but decided not to pursue it on my blog. It just seemed be the all to ordinary whistling past the grave yard that one sees in far too much of the financial press.

Yesterday however, I got an email from Paul Lamont, who I have cited before here, who runs Lamont Trading Advisors, who sees their mission as being to prepare clients for a, “major bear market”.

He has a very nice rebuttal to Mr. Lamonica’s article, noting that:

• Lamonica’s use of unemployment as a metric is disingenuous, as it is a lagging indicator. [I would add that the unemployment stats are also highly massaged these days as compared to 1933].
• The absence of deflation is not a difference, inflation continued until 1931 in the great depression, and the same applies to commodity inflation and inflationary concerns.
  
• That the recent bounce back of the stock market is actually rather similar to what happened in the great depression, with the eventual bottom occurring because the banking system froze up:
  

Go and read his article, I wholeheartedly approve, though I do differ on one point: I see the continuing economic crisis mirroring those that occurred in Asia, Argentina, etc. where you see sudden and catastrophic devaluation of the currency (i.e. inflation), as opposed to the 1930s style depression.

That’s why I have 30% of my 401(k) in overseas index funds.

I was given a link to, “Immoral Hazard” on Rense.com, and a quick google led me to the original article at https://www.gmo.com/websitecontent/JGLetter_ALL_1Q08.pdf (pdf).

Go read both, though all the obvious caveats about Rense.com apply.

Kevin Phillips suggests that the United States may be facing a collapse of empire, as Holland did in the 1700s, and Britain did in the first half of the 1900s:

There is a considerable literature on these earlier illusions and declines. Reading it, one can argue that imperial Spain, maritime Holland and industrial Britain shared a half-dozen vulnerabilities as they peaked and declined: a sense of things no longer being on the right track, intolerant or missionary religion, military or imperial overreach, economic polarization, the rise of finance (displacing industry) and excessive debt. So too for today’s United States.

…

The most chilling parallel with the failures of the old powers is the United States’ unhealthy reliance on the financial sector as the engine of its growth. In the 18th century, the Dutch thought they could replace their declining industry and physical commerce with grand money-lending schemes to foreign nations and princes. But a series of crashes and bankruptcies in the 1760s and 1770s crippled Holland’s economy. In the early 1900s, one apprehensive minister argued that Britain could not thrive as a “hoarder of invested securities” because “banking is not the creator of our prosperity but the creation of it.” By the late 1940s, the debt loads of two world wars proved the point, and British global economic leadership became history.

He then makes the caveat that the predictions of doom for Great Britain started well before any collapse, with peaks in such concerns in the 1860s and 1890s, when the collapse of empire was primarily a post 1918 phenomenon.

It’s a valid point, but we are operating on internet time, and the degree of leverage is further, and capital is far more mobile.

He also notes that we have already experienced periods where the fall of America was predicted, in the early 1970s, and the early 1990s.

I’m a bear, as I’ve repeatedly noted, and I’ve noted that a number of factors, particularly the rise of the Euro as an alternative reserve currency, make make it much more likely that the US will lose its status as the financial capitol of the world.

Go read the whole article. It’s only about 1200 words.