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Signs of a looming economic depression?

Is an economic depression on the horizon? A report by CNBC says the signs are there:

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.

So what caused the recovery of 1930 to fall apart and send the economy into a decade long depression? A lot of very expensive, big government programs and policies that were supposed to create jobs and infuse money into the economy but ended up suffocating the free market instead. In other words, what happened in 1930 is pretty much playing itself out right now.

What if this analysis, that we're reliving 1930, is accurate? Is your family prepared for a possible economic collapse?


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Comments (12)

We are certainly headed for... (Below threshold)
Jim Addison:

We are certainly headed for a severe downturn. The EU dodged a bullet last week as the Spanish debt auction went off without a hitch and at reasonable interest rates, but it wasn't a huge amount. There are many more bullets on the way, and debt bombs for the USA. China's ability to mask their own economic problems is deteriorating, too, as exports are down and they've been using export growth to cover the problems.

There remains a huge uncertainty in American business, too. Obama seems determined to follow an anti-capitalist course no matter how much it hurts, so why would you invest in expansion now, when he has only started his micromanagement of the domestic economy?

Calling a head and shoulders top is rather iffy at this point. How does he find 9800 to be the second shoulder? It could also be at 9200, 8700, or down as far as 8000. The lower the second shoulder, the steeper the correction will be, of course.

Falling equity markets mean two things: corporations cannot get as much cheap financing for expansions when their market value is lower, and it is also more difficult to attract new investors in a down market.

It certainly appears that at the very least the Dow will be under 9000 before it is again over 11,000. This alone will make investors wary, and delay any recovery based equity capital.

Yes things are bad. Yes th... (Below threshold)

Yes things are bad. Yes they are getting worse. But what the hell do you expect from a Kenyan born socialist sitting in the White House. But more than that all the fools out there that support this Community Organizer that we know very little about. November can become the Month of change if people "WAKE UP" and vote correctly. If they don't I am considering a one way ticket to Australia. GOD help us.

Is your family prepared ... (Below threshold)

Is your family prepared for a possible economic collapse?

I have a more important question.

In today's intricately interconnected world, where the vast majority of jobs are service jobs that depend on somebody else having the money to pay for your services, is it even possible to prepare for an economic collapse?

My image of the Great Depression is that it was bad in the cities, and worse in the Dust Bowl area .. but for the majority of Americans who still lived in small towns or on family farms, it wasn't that bad. They could grow their own food, do a lot of their own handy-work, barter for the few things they needed from others. Most people can't do any of those things today.

Obama = FDR on steroids.<br... (Below threshold)
retired military:

Obama = FDR on steroids.

Steroids?More like... (Below threshold)


More like crack, with an LSD chaser.

Obama = Jimmy Carter on ste... (Below threshold)
John S:

Obama = Jimmy Carter on steriods.

Stop the spill-plug Oboreho... (Below threshold)
gary gulrud:

Stop the spill-plug Oborehole!

Definitely a looming double... (Below threshold)
Caesar Augustus:

Definitely a looming double dip recession. If Obama is reelected in 2012 then all bets are off and we might actually sink into a full-fledged depression.

Barry is Hoover & Carters l... (Below threshold)

Barry is Hoover & Carters lovechild.

Wolfwalker,Interes... (Below threshold)


Interestingly, your observation squares precisely with the Depression stories of my wife's family and mine. Those who fared the best were those who lived on family farms or in the country where they could raise their own food (crops and livestock). Most essential things were obtained through bartering, and necessary cash was earned through the sale of crops or livestock, or by providing essential services like mechanical repairs. Unfortunately there are few of us who could do that today.

We learned today why the De... (Below threshold)
John S:

We learned today why the Democrats won't write a budget. The government added $210 billion in debt in June. Annualized that's a $2.5 trillion deficit. (Remember how pissed we were about Bush's $160 billion ANNUAL deficits. The good old days.) Looks like the debt ceiling will be breached again before the election - or it would be if there was a budget...

Can't see how this can end well, no matter what party holds Congress in January.

FDR is lionized by the lef... (Below threshold)

FDR is lionized by the left, when in reality he was a communist. Obama is showing so many similarities with FDR that it's scary. FDR had a running fight with the Supreme Court even tried to add 9 more justices. He tried to spend our way out of the Depression, does any of this sound familiar.






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