The Greatest Bubble

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"It was, after all, post-Russia/LTCM "mopping up" that fueled the tech Bubble, and then the post-Tech and 9/11 mopping fostered the Wall Street/mortgage finance Bubble. And the latest big mop up job sets the stage for perhaps the greatest Bubble all them all - the Global Government Finance Bubble" (Doug Noland, And No Dialing Back, prudentbear.com, September 11, 2009).

"In no way do I believe the 2008 financial crisis was the current historic cycle's 1929. There was indeed significant financial and economic stress in 2008/09. But there was definitely no global collapse in Credit or economic activity - no globalized economic depression. Actually, on a global basis debt growth has run unabated. And after a meaningful yet non-catastrophic setback in 2009, global GDP growth quickly recovered..." (Doug Noland, Uninsurable Risks, prudentbear.com, June 28, 2013).

Where Are We Today?

"Things have changed in a world dominated by institutional investors, hedge funds and service industries, and sentiment is as likely to drive prices as anything else, [Laszlo Birinyi] the 72-year-old former Salomon Brothers Inc. analyst wrote in a note to clients...

"It's probably no coincidence that three of the four biggest bull markets of the last century have occurred since 1982, according to Birinyi. He wrote that comparing the latest one to all the rallies since World War II makes it seem abnormally long and is the wrong way of looking at cycles" (Joseph Ciolli, Birinyi Says You Can Toss Out the Old Tools for Calling S&P 500, bloomberg.com, August 6, 2015).

"The United States' economy has been in recession only nine times in the last 60 years, or roughly once every seven years. Before the last recession in 2001, the economy even expanded for a full ten years. And the average recession has only lasted for about four quarters" (Joachim Fels, Recession 2007, morganstanley.com, November 18, 2005).

While the length of bull markets may have changed, but has human nature changed? It is suggest that while each bull market has its own chracteristics, human nature, which does not change, dictates that there are common characteristics to each bull and bear market.

It is also suggested that, in factoring in that recessions after WW2 have occured "roughly once every seven years", the post-WW1 boom leading to the 1929 stockmarket high provides a broad template to view the post-Cold War boom leading to the current historical cycle's 1929-type stockmarket high. See below.

The Stockmarket Bubble - The Phase Transition

"By a phase transition what I mean is, in the 1980 [gold] mania for example, from 1976 it went from about $102, up to mid December of 1979, to finally reach $400.  The last six weeks it goes from $400 to $875.  So it's a doubling effect that you will see, but in a very, very short, compressed time period.  When you start seeing that, that is the sign of a major high..." " (ingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/10/2_KWN_Exclusive__Martin_Armstrong_-_Golds_Next_Move.html).


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"That [phase transition] will baffle most and will place the maximum amount of pressure on Asia and Europe" (Martin Armstrong, Why the Fed Will Have to Raise Interest Rates, armstrongeconomics.com, May 27, 2015).

"In 1927, the USA lowered interest rates in a desperate attempt to send capital back to Europe. The Fed was then criticized for lowering rates that sparked the stock bubble. The Fed will RAISE rates thinking that the higher rates will temper the stock rally. They will make the SAME PRECISE mistake they made in 1927.

"We can see that the Fed raised rates from 3.5% in 1927 up to 6% in 1929 and the stock market doubled on capital inflows. The Fed stating it may have to raise rates before inflation is the code word they are fearful of of stock market rally. They will have to raise rates or suffer criticism for creating a bubble domestically while raising rates will case the collapse in $6 trillion of dollar debt issued by other countries.

"When rates start to rise, then we will most likely see the breakout to the upside in a phase transition" (Martin Armstrong, Dow to Rise with Higher Interest Rates, armstrongeconomics.com, January 10, 2015).

"A Phase Transition is typically 52 to 59 weeks in general. This is the broad measurement and not the fine-tuning..." (Martin Armstrong, The Pending Phase Transition & Cycle Inversion, armstrongeconomics, October 12, 2014).

"... what history teaches us about Fed tightening cycles is very different from most of the advice in such articles - particularly those that are saying to batten down the hatches and run for cover. The bottoming of interest rates in an economic cycle and/or reversal in Fed policy seldom sounds the "death knell" for a bull market...

"Today's investors would also likely be surprised to learn that since 1960...

"During the past 11 tightening cycles when the Federal Reserve made its first Discount Rate hike, the stock market was higher 12 months later 73% of the time, with the majority of those showing double-digit gains.

"And in the 17 instances where bonds tightened for the Fed (10-year Treasury yields rose over 1% pt from a notable low), the stock market was higher a year later over 70% of the time.

"So rather than joining the lemmings or feral hogs running wild on Wall Street, we urge you to turn inside for guidance on where to watch in the coming weeks and months..." (James Stack, Avoiding the Lure of the Lemmings, investech.com, Investech Research, June 28, 2013, p.1).

It is suggested here that the US stockmarket will enter its mania phase and rising interest rates will be part and parcel of the boom, as they have been in the past.


Global Crisis - Boom - Bust


USA

JAPAN

USA

1927
1987
1998
Interest rates lowered 0.5 of a percentage point due to a potential international financial crisis

Low interest rate policy continued due to potential global crisis as a result of USA October stockmarket crash
Interest rates lowered three times as a result of a potential global meltdown
Cue for mania stage of stockmarket boom

Cue for mania stage of stockmarket boom

Cue for mania stage of stockmarket boom

1928
1989
1999
Three interest rate increases
DJIA up 48%
Three interest rate increases
Nikkei up 29%
Three interest rate increases
Nasdaq up 86%

1929
1990
2000
New York Federal Reserve Bank proposed an interest rate increase in February; rejected by the Federal Reserve Board in Washington
Interest rates increased one percentage point in March
Interest rates increased 0.25 of a percentage points in February

Interest rates increased 0.25 of a percentage points in March

Interest rates increased 0.5 of a percentage point in August
Interest rates increased 0.75 of a percentage point in August
Interest rates increased 0.5 of a percentage point in May

Dow Jones loses
35 percent*
Nikkei loses
38.7 percent
NASDAQ loses
51 percent*

* from peak


The more things change, the more they stay the same

It was noted above that while each economic boom its own characteristics, each economic boom and bust may also share that some common features. Presented below is an argument that post-WW1 boom and the post-Cold War bom share some characteristics that help provide a road-map to the future.

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"The 1920s Credit Bubble spawned 3 asset bubbles

"In a major paper by the Bank for International Settlements, "The Great Depression as a Credit Boom gone Wrong" Barry Eichengreen and Kris Michener (2003) set forth how the dramatic expansion of credit in the 1920s set the stage first for overconsumption, and then the drastic decline of the great depression:

"The 1920s was a decade of expansion, reflecting recovery from World War I, new information and communications technologies like radio, and new processes like motor vehicle production using assembly-line methods. Accounts of the twenties in the United States ... emphasize the ready availability of credit, reflecting the ample gold reserves accumulated by the country during World War I, the stance of Federal Reserve policies, and financial innovations ranging from the development of the modern investment trust [i.e., mutual fund] to consumer credit tied to purchases of durable goods like automobiles. Credit fueled a real estate boom in 1925, a Wall Street boom in 1928-9, and a consumer durables spending spree spanning the second half of the 1920s.

"... we can see that the 1920s featured a property boom that peaked in 1925 (just as our own peaked in 2005-2006)...

"An examination of the 1920s credit bubble is proof of Mark Twain's quip that "History may not repeat, but it does rhyme" (The 1920s Credit Bubble, dailykos.com, January 14, 2008).

The Template

It is suggested that the Post Cold War Boom may be 'viewed' by extrapolating a 'template' from the Post WW1 boom incorporating three consecutive bubbles and four recessions over a longer time span - longer expansions, that is increased time between recessions in conformity with roughly post-WW2 recession frequency.

While the first chart defined the third bubble of the post Cold War period as the "Government Financial Bubble" it may also be referred to as the "Stockmarket Bubble"; the third bubble period peaks with the high in the Dow Jones Industrial Average.

While the expansion of July 1921 to May 1923 has no defining 'rhymes' with the expansion of March 1991 to March 2001, there is an 'rhyme' between the contraction of January 1920 and Juy 21 1921 and the contraction of March 2001 to November 2001:

September Bombings in the New York Financial District

In the former times this 'bombing' (September 16, 1920) occurred in the first recession; in the latter times this 'bombing' (September 11, 2001) occurred in the second recession.

"... the bloodiest single event came ... At noontime on September 16, 1920, amid the lunchtime crowds, a wagon filled with iron sash weights pulled up outside the offices of J. P. Morgan & Company at 23 Wall Street. Suddenly it exploded, hurling iron like shrapnel in all directions and blowing windows within a half-mile radius. Thirty eight people were killed and 300 wounded" (Maury Klein, Rainbow's End - The Crash of 1929,  (New York, Oxford University Press, 2001), p.26).

The deaths by a 'horse-drawn wagon' bomb 'parallels' the deaths by 'aeroplane' bombs of 2,753 people, not including the hijackers, resulting from 9/11.

Tech Stocks

Post WW1: Cars - Aircraft - Radio

Post Cold War: Computers - Internet - Mobile Phones

"The similarities between the Radio phenomenon of the 1920s and the Internet of the 1990s are painfully obvious. From the inception, to the skeptical acceptance, to the public's infatuation and phenomenal growth, who could ever guess that we would be reading the same media "insights" 70 years later" (James B. Stack, What's Left of the New Era? (Radio vs Internet), prudentbear.com, May 19, 2000).

The 'new' technology stocks of the 1920s crashed in the 1929 crash; this would be compareable to the "consumer durables spending spree" crashing with the stockmarket in the earlier period.

"The speculator's fancy for new technologies was served in the bull market. The motor car replaced the railroads as both the engine of economic prosperity and the favoured object of speculation. It transformed the culture and geography of the nation; roads were surfaced, highways built, and garages erected to accommodate the increasing numbers of passenger cars, which rose from seven million to twenty-three million during the 1920s. Over a million visitors flocked to view the new Model A at Ford's New York headquarters. The excitement was reflected in the stock market, where General Motor's share price increased tenfold between 1925 and 1928, an advance so rapid that it put the stock market on the front pages of the newspapers. When J. J. Raskob made his proposal for universal wealth in August 1929, he pointed out that $10,000 invested a decade earlier in General Motors would have grown to more than $1.5 million.

"The public interest generated by the motor car was exceed only by that of radio, first launched by Westinghouse in 1920. The wireless became the purveyor of fashion across the nation. Sales of radio sets rose from $60 million in 1922 to $843 million six years later. The new industry was dominated by Radio Corporation of America... which was both the largest manufacturer of radios and the leading broadcaster. The company's earnings increased from $2.5 million in 1922 to nearly $20 million in 1928, and its stock climbed from a low of 1½ in 1921 to 85½ in early 1928. From there is was propelled by Meehan's pool operation to a high of 114 in 1929, seventy-three times its earnings and nearly seventeen times book value. RCA was highly leveraged, paid no dividends and expanded rapidly through acquisitions. In 1929 it was the most heavily traded stock on the New York Stock Exchange, where it was known as the "General Motors of the Air" (Edward Chancellor, Devil Take The Hindmost, (New York: Plume, 2000), pp.205-6).

"... the stock of RCA, the only company that successfully built a profitable business from radio, lost 97 percent of its value between 1929 and 1933" (Burton G. Malkiel, A Random Walk Down Wall Street, Eight Edition, (New York: W.W. Norton, 2003, p.102).

"The technology was revolutionary, the business was genuine and the company eventually delivered on its business plan. But early investors lost all the same" (David Crowe, Investors could learn from radio's lessons, AFR, March 3, 1999, p.11).

"The national euphoria following Charles Lindbergh's solo crossing of the Atlantic in 1927 propelled the speculative appeal of the young aircraft industry. Wright Aeronautical, Curtise, and Boding Airplane ... became favourites in the stock market..." (Edward Chancellor, Devil Take The Hindmost, p.206)

Post WW1 Boom As Type for Post Cold War Boom - see also the chart of the Anglo-American Hegemonic Cycle

The primary post-war recessions were 1920-21 and 1990-91.

The post WW1 boom ran from 1921 to 1929. Between 1921 and 1929 there were two mild recessions (1923-24 and 1926-27). This then provides the type for the post Cold War boom - 1991 and continuing. The mild 1923-24 recession is typed with the mild 2001 recession; and the mild recession of 1926-27 is typed with the severe 2007-09 recession.

Real Estate Booms ocurred in the 'second' expansion of each period - July 1924 to October 1926 and November 2001 to December 2007; policy response during the recession and after contributed to stockmarket booms.

"There was a vigorous cyclical recovery after the trough in mid-1924, accompanied by a real estate boom that leveled off in 1926 and the beginning of a stockmarket boom. Towards the end of 1926, moderate restraining measures were taken before the cyclical peak which occurred in October 1926. The subsequent contraction was mild. Not long before the cyclical trough in November 1927, easing measures were taken. The buying rate on banker's acceptances was reduced ¼ of 1 percentage point from July to August 1927, and the System's bill holdings rose by $200 million; the discount rate was reduced by all Banks from 4 to 3½ between July and September 1927; and open market purchases of government securities totaling $340 million were made between late June and the middle of November 1927..." (Milton Friedman and Anna Jacobson Schwartz, A Monetary History of the United States, 1867-1960, p.288).

1927: "Had the situation continued, most European nations would have had to leave the gold standard. Given the complexities of the reparations situation, the United States would be dragged down with them in a major financial crisis. Accordingly, Secretary of the Treasury Andrew Mellon and Benjamin Strong eagerly accepted initiations from European central bankers to a conference on the question. In 1927 Montague Norman of the Bank of England, Hjalmar Schacht of the Reichsbank, and Charles Rist of the Bank of France met with their American counterparts. The situation might well be saved, the argued, if the Federal Reserve cut its discount rate. Such an action would lower American interest rates in relation to those in Europe, and therefore attract funds to European banks. At the same time, low rates would encourage borrowing in America and stoke the speculative furnaces. Strong [President of the New York Federal Bank] was unhappy about the latter probability, but in the end proved willing to further stimulate an already active American economy in order to save international liquidity. In 1927, the Federal Reserve lowered its discount rate from 4 to 3½ percent.

"Wall Street greeted the lowered rate... Thus, the international situation was resolved in such a way as to encourage speculation on Wall Street" (Robert Sobel, Panic on Wall Street, (New York: Macmillian, 1968), pp.360-61).

2007: "The Federal Reserve, European Central Bank and three other central banks moved in concert to alleviate a credit squeeze threatening global growth, in the biggest act of international economic cooperation since the Sept. 11 terrorist attacks...

" "By allowing the Federal Reserve to inject term funds through a broader range of counterparties and against a broader range of collateral than open market operations, this facility could help promote the efficient dissemination of liquidity," the Fed statement said" (Scott Lanman, Fed, ECB, Central Banks Work to Ease Credit Crunch bloomberg.com, December 12, 2007).

"Robert Brusca at FAO Economics said the plan appears aimed at addressing the cash squeeze facing European banks after the collapse of the US commercial paper market - short-term loans that may be backed by European banks.

" "It's an attempt to get dollar liquidity to European banks that were caught short when the US commercial paper market collapsed," Brusca said" (Fed other central banks in joint effort to ease credit squeeze, @smh.com.au, December 13, 2007).

The Central Bankers conference and response to crisis in 1927 is the type for the Central Bankers response, and continuing, to the crisis in 2007-09.

The buying of government securities, as noted by Milton Friedman and Anna Jacobson Schwartz above, was the type for Quantitative Easing - purchasing of mortgage-backed securities and government securities.

"The rediscount rate of the federal Reserve was cut from 4 to 3.5 per cent. Government securities were purchased in considerable volume with the mathematical consequences of leaving the banks and individuals who had sold them with money to spare. Adolph C. Millar, a dissenting member of the Federal Reserve Board, subsequently described this as 'the greatest and boldest operation ever undertaken by the Federal Reserve System, and...[it] resulted in one of the most costly errors committed by it or any other banking system in the last 75 years'. The funds that the Federal Reserve made available were either invested in common stocks or (and more important) they came available to help finance the purchase of common stocks by others. So provided with funds, people rushed into the market. Perhaps the most widely read of all the interpretations of the period, that of Professor Lionel Robbins of the London School of Economics, concludes: 'From that date, according to all the evidence, the situation got completely out of control' " (John Kenneth Galbraith, The Great Crash 1929, (Ringwood: Penguin Group, 1992), pp.38-39).

"Global central banks around the world continue to push monetary easing like never before. The Fed and Bank of Japan currently combine for almost $180bn of monthly quantitative easing, an historic experiment in monetary inflation... the world is in the midst of a unique episode of unconstrained Credit on a global basis...

"Each monetary inflation has its own dynamics and nuances. These days, we're dealing with central banks and their electronic "printing press" - injecting liquidity into the marketplace as these banks purchase marketable debt securities... It essentially feeds liquidity directly into the financial markets - first and foremost inflating securities prices. There is little generalized inflation in nominal purchasing power, hence in prices throughout the real economy. Indeed, abundant marketplace liquidity actually works (unevenly) to stimulate investment. And with consumer prices in aggregate seemingly well contained, most will find justification for quite elevated stock and bond prices. With securities markets booming and traditional inflationary risks seemingly nonexistent, one is easily enamored with the central banks' new electronic toys...

"On the one hand, years of manipulated interest rates, markets backstops and interventions ensured that sophisticated market operators accumulated astronomical wealth and assets under management. And, going on five years now, Fed zero interest rate policy has pushed the unsuspecting saver out into the risk market jungle...

"The Fed and global bankers should never have become such active players in the financial markets. Asset inflation is indeed more dangerous than consumer price inflation. Central banks will actively support asset prices, while refusing to remove the punchbowl... Today, Bubbles proliferate throughout the securities and asset markets. It's all become one big historic global Bubble" (Doug Noland, Thoughts on the Electronic Printing Press, prudentbear.com, May 10, 2013).


(Martin Armstrong, Dollar - Trade - Reserves, armstrongeconomics.com, May 8, 2013).

Two Phases to Stock Market Boom

"Though signs of fragility abound, the S&P 500 held its ground and remains locked in the tightest trading range since 1927" (Joseph Ciolli Oliver Renick, Charts Strike Back as S&P 500 Turns Tide in Global Selloff, bloomberg.com, August 13, 2015).

"The Dow has lost 5.2 percent since the end of 2015 in the worst first four trading days since the 30-stock index was created in 1928" (Caroline Valetkevitch, Dow, S&P off to worst four-day Jan start ever as China fears grow, reuters.com, January 7, 2016).

The stockmarket action may be viewed in two phases - one prior to interest rate increases and one after.

The Dow Jones rallied, after the one and only cut in the discount rate in the recession of October 1926-November 1927, 7.3 percent to the first interest rate increase, but rose 94.2 percent after.

The Dow Jones rallied, after ten cuts in the federal fund rate in the recession of December 2007-June 2009, from the low on March 9, 2009 to the high on May 19, 2015, 179.7 percent.

While the one discount rate cut of the third recession of the earlier period and the time frame of and the rally of the Dow Jones in the third expansion of the earlier period is far from spectacular when compared with the ten federal funds rate cuts of the latest period and the time frame of and the rally of the Dow Jones in the third expansion it is suggested that a second phase, with the backdrop of interest rate increases will occur.

This implies that a rhyme with 1928-1929, where interest rate increases were the backdrop to the short mania stage, is yet future.

The 'rhymes' concerning stock market boom, margin debt and bust of Germany in 1927 and China in 2015 suggests that the American melt-up, after the false move, is still to come.

Second-largest economies 1920s and Today

Germany 1927:

"...at the end of 1925, the aggregate stock market index stood at 99 percent (of its pre-WW I level). During 1926, it rose to 140 percent (November 1926) and even higher in 1927 (178 percent in April 1927). The new confidence in stock markets increased the demand for margin credit...

"The Reichsbank warned the largest private banks: If the banks would not cut their margin lending by at least 25 percent, the Reichsbank would not redeem their promissory notes anymore. This threat was effective and on 12 May banks declared to cut their margin credit by 25 percent over the coming weeks. This large shock on credit had immediate consequences. On 13 May, later known as the "Black Friday", the whole stock market tumbled. The average decrease was 13 percent, but some stocks did far worse. In the following weeks, stocks declined further. The large shock on lending was transmitted to investors" (Gissler, Stefan (2015), A margin call gone wrong: Credit, stock prices, and Germany's Black Friday 1927, Finance and Economics Discussion Series 2015-054. Washington: Board of Governors of the Federal Reserve System, dx.doi.org/10.17016/FEDS.2015.054.

"While traditionally, we have been led to think of a monetary transmission of deflationary shocks from the U.S. to the rest of the world, the evidence presented in this paper suggests that in the late 1920s, the main deflationary impulse originated in Germany" (Albrecht Ritschl, Peter Temin and the Onset of the Great Depression in Germany: A Reappraisal, Department of Economics University of Zurich/Switzerland and CEPR1 June, 1999).

China 2015:

"By June 12 the CSI 300 Index, with the ASHR ETF tracks, reached a seven-year high. The index was up 150% in the previous 12 months. The ChiNext Index, comprised of small- and mid-cap stocks, was up 185% during the same time frame, and 164% in 2015 alone as of June 12. Retail investors, who comprise 80% of the market, bid up shares to an unsustainable level and they did it, largely, on margin.

"The price-to-earnings multiple on the ChiNext Index exceeded 85 times in mid-June because of the buying power of the Chinese investor.

"Alarmed by the margin bets being made in the A-shares market, the Securities Regulatory Commission (CSRC), tightened margin requirements which led to a violent sell-off the next day. Moreover, approximately half of all the stocks across the exchanges were suspended from trading during the week of July 6" (Kenneth Rapoza, How Bad Is Margin Trading In China? forbes.com, July 13, 2015).

The Shanghai Composite peaked on June 12, 2015 at 5166.35, and then fell 32.1% to July 8 closing at 3,507.19, for the first leg down.

From the periphery to the centre

"The major stock market boom on Wall Street coincided with a virtual suspension of new international lending and a retreat of capital. New money from America stopped going to Germany, Latin America, or Central Europe in June 1928. All the hot money went to Wall Street instead. And much more foreign money, especially English money, was also attracted by high returns as compared to bleak prospects elsewhere" (James Dale Davidson & William Rees-Mogg, Blood in the Streets, (New York: Summit Books, 1987), p.207).

"Bubbles are NOT created solely by interest rates nor by changes in money supply. The driving force is always international capital flows ... any country can be overwhelmed by external forces" (Martin Armstrong, Stockman v Greenspan - Just Absurd, armstrongeconomics.com, July 26, 2014).

(For Australian readers: "Foreign investment now accounts for about 13 per cent of turnover in the Australian real estate market, according to UBS economist Scott Haslam. He says offshore investment in housing nearly doubled over the past year - most of which came from China" (Eryk Bagshaw, Singaporean investors hungry for a piece of the Australian housing market, smh.com.au, July 25, 2014).

"Not all countries implode at the same time. It is a series of dominoes. Europe and Japan must tip over forcing capital to concentrate in the United States" (Martin Armstrong, Unemployment the lowest since 2008, armstrongeconomics.com, May 10, 2013).

Interest Rate Increases to Confirm Phase Transition

But we need the interest rate increases to confirm the phase transition in American stocks.

"A bubble, after expanding gradually for a period, wants to surge and then burst. In 1999 and early 2000, the U.S. stock market did that" (Andy Xie, Global economy balanced on a pinhead, marketwatch.com, June 3, 2013).

"...the Federal Reserve began a series of rate cuts ... by a quarter point in September, October, and November [1998] to avert a global economic meltdown and in the process sparked a 191% jump in the Nasdaq over the next 18 months, and a 46% rise in the Standard & Poor's 500 Index" (Nasdaq falls to year low, news.bbc.co.uk, December 19, 2000).

This is how it played out in 1928, using the NY Fed Bank effective dates - Benjamin Strong, the head of the NY Fed bank was the Benjamin Bernanke of the 1920s.

Interest Rate Increases New York Federal Bank 1928

February 3, 1928 discount rate increased from 3.5 to 4 percent - Dow Jones rose 94.2% to the 1929 high from that date

March 18, 1928 disocuint rate increased from 4 to 4.25 percent - Dow Jones rose 75.11% to the 1929 high from that date

July 13, 1928 discount rate increased from 4.25 percent - Dow Jones rose 83.4 percent to the 1929 high from that date

Last Interest Rate Cut Before the Top

August 9, 1929 disocunt rate increased from 5 to 6 percent - Dow Jones rose 12.8 percent to the September 3, 1929 high from that date.

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(Martin Armstrong, A normal market, armstrongeconomics.com, June 1, 2013).

The Two Bens

"It reminds of 1927 when faltering spirits with the collapsing Florida real estate bubble needed reviving. Ben Strong, then head of the New York Fed, told a French central banker that he was going to give the markets a "coup de whiskey". The rally was terrific but as it turned out, yet another story in the house of cards" (Bob Hoye, Markets Have Had A Coup de Whiskey, safehaven.com, Novemeber 5, 2007).

Benjamin Strong, Jr., President of the Federal Reserve Bank of New York (October 5, 1914 - October 16, 1928).

Benjamin Bernanke, Chairman of the Federal Reserve, (February 1, 2006 - February 3, 2014).

It was noted above that the 2007-2009 recession/crisis has a rhyme with 1926-1927 recession/crisis - Central Banks intervention temporary alleviating the crisis in Europe.

But the European problem was replayed some years later and Benjamin Bernanke once again played from the Benjamin Strong, Jr., playbook.

"I believe central bank measures implemented in the summer of 2012 will go down in history as a catastrophic mistake - akin to Benjamin Strong's infamous 1927 market "coup de whiskey" ...

"It's my view that the Fed and BOJ's extraordinary measures to devalue the dollar and yen - as the ECB refrained from QE  - were instrumental in bolstering the vulnerable euro" (Doug Noland, How the Euro was (Really) Saved, prudentbear.com, May 23, 2014).

Unfortunately the former Federal Reserve Chairman Ben Bernanke thought he was dealing with a post-1929 situation but, like yesterday's New York Federal Reserve Bank Governor Ben Strong, he was dealing with a pre-1929 situation - contributing to a Stock Market Crash and Great Depression.

Not in office to overseas their contributions to the Great Depressions

"Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do it again" - Ben Bernanke, Speech on Milton Friedman's ninetieth birday, November 8, 2002.

Benjamin Strong, the NY Federal Reserve Bank Governor, who provided the coup-de-whiskey to the stockmarket against the backdrop of the 1926-27 recession, a potential European crisis and the real estate bust after the peak in 1926, provided the type for Ben Bernanke.

Ben Strong, who played his part in supporting the final stockmarket rally that preceded the Great Depression of the Twentieth Century, died in 1928 and so was not around, literally, to see the end result. In a similar way Ben Bernanke, who played his part in the final stockmarket rally that will precede the Great Depression of the Twenty-first Century, will also not be around, in the sense of being in office, to see the end result.

Janet Yellen, or successor will now following in the footsteps of George Harrison to oversee the coming Great Depression.

Note:

It is a tragedy that Alan Greenspan and Ben Bernanke appear not to understand their religious heritage - see Biblical Financial Cycles

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