History Rhymes

Ryan Avent and the Ghost of the 1930s. (scroll down for English in your browser doesn’t take you there). Really needs no comment.

Felix Zulauf’s assessment, from the Barron’s Smart Money Roundtable, is pretty consistent with my view of the timetable.

The next few weeks will be extremely volatile. I expect the market to go below the latest lows in September. The central bank will come in to provide liquidity, but timidly at first because the Fed was bashed for QE2. After the fall low, equities will recover part of what they lost into the turn of the year and then fall again. Economies around the world most likely will be in recession next year.

Once the S&P 500 falls to 1000 or below in the first half of 2012, the Fed will come in and try to support the system. Eventually the ECB [European Central Bank] will try to do the same thing in Europe. The damage in Europe will be greater, as Europe’s financial system is even weaker than the U.S.

Providing liquidity isn’t the solution, but if we don’t do it the system will break down. Providing growth is a difficult task. I don’t know how to do that. Long-term, we have begun the Japanification of the Western World. If we are unable to bite the bullet, our problems will grow bigger.

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