1929 Deja Vu: Moral Collapse Precedes Financial Collapse

90 years ago this month, Wall Street crashed in the worst decline in market history. The market eventually stabilized and then rallied for several months into 1930. As global trade wars escalated, false optimism prevailed, as investors believed the worst was over. Then, the market rolled over and never looked back. Turns out, the worst hadn't even started yet...

Revisionist historians of the right wing persuasion believe that FDR used the 1929 crash and the ensuing mayhem to undermine capitalism. A socialist Shock Doctrine if you will. This is a prevalent belief among libertarians. Real historians - not biased by politics - know that FDR SAVED capitalism in America, because without the public interventions, the country was heading straight for revolution. The fact that the U.S. is the least socialist country in the developed world gives lie to the entire myth on its face, but to press the point home, we have now re-created the exact same events. So now we'll see where we land on the political-economic spectrum. To the left of FDR or to the right. I'm pretty sure, we all know the answer. This is an existential moment for criminality...

"Trump has seen for decades a loose culture that has enabled white-collar criminals to inflict great damage on the American people and get away with it"

This year, federal prosecutors are on track to bring the fewest number of white-collar criminal cases this year in at least 33 years...our country’s not taking white-collar crime seriously has helped to culturally normalize it and reinforce in the minds of executives the idea they can violate the spirit — if not the letter — of the law without fear of recrimination. This in turn fuels still more bad behavior while lowering the bar of what voters consider acceptable behavior."

Daniel Patrick Moynihan, the late senator from New York, once warned of the danger of “defining deviancy down,” in which worse and worse behavior comes to be accepted as the norm. This explains much about how Trump — whose company has been linked with everything from housing discrimination to outright fraud — has gotten away with so much. His standards are low; his ethics, nonexistent. And yet he is adored by millions. This says as much about him as it does about us."

Hedge fund manager Ray Dalio is making the rounds this year selling the view that this era is very similar to the late 1930s - Rising nationalism, economic populism, socialism versus capitalism. Neo-Nazis on the rise, so forth. In his view, 2008 was the equivalent of 1929. There is only one problem - he seems to have forgotten the part about the crash. I mean the real crash, not that dip that lasted a few months in 2009.

The main difference between 2008 and 1929 is that policy-makers couldn't control the crash in 1929. It got away from them. The market sank -90% in three years. Across every major risk asset class investors were wiped out. The gold standard had prevented the type of monetary mega bubble we've seen in the past decade which saved capitalism from the brink of extinction. Which is why back in the early 1930s, there were no apologists for greed running amok as there are now. Occupy Wall Street would have been a sustained movement in that era. Contrast that experience with 2008 and the post-Lehman era - tens of trillions of central bank funny money boosted U.S. stocks back to the Lehman level within 18 months, new highs within five years. Whereas it took 25 years to recapture 1929's high. No surprise, during this past decade, the gap between the bailed out wealthy and everyone else has  skyrocketed to levels last seen in...1929. Worse yet, unlike the 1930s, the past decade did nothing to resolve the debt crisis that created the 2008 meltdown in the first place. It was not a reset, it was the opposite - a massive expansion of debt levels particularly with respect to corporate and sovereign debt levels.

Here we see that in the past year, central banks have over-stimulated gamblers to proactively prevent recession. However, in doing so they've set-up an asset crash:

All of which means that this past decade has been nothing like the 1930s from an economic and political standpoint because there has been no "shared sacrifice". There has only been one monetary bailout after another. Which was by far the worst outcome from 2008 for true believers of capitalism  - no accountability and no prosecutions. And that has given rise to a culture of licentious criminality, the likes of which the U.S. has never seen before.

What the Lonely Crowd accurately predicted was a consumeristic society cleaved of traditional values, floating adrift in a sea of relative morality. Competitive conformity being the sole moral standard. Fast forward to several rounds of corporate shock doctrine later and out of sheer expediency to save the "system", white collar criminality had to be normalized. If they didn't bail out criminals in 2008, the whole system would have collapsed. One decade of bailouts later and acceptable deviancy has been defined down to the point where the Anti-Christ is now the saviour. Sanctimonious criminals are doling out religious advice to the "unfaithful". Republicans are ignoring Trump's ever-greater abuses of power because criminality is now existential to "the system".

Nevertheless, the amount of corruption people deem as acceptable will collapse along with the markets. Prechter has made this point from a social mood perspective, that when markets are booming people turn a blind eye to malfeasance, but when losses mount, social mood turns dark and so-called "values" change. It's a very cynical view of humanity, painting a picture of stark moral nihilism, but sadly this era proves he is right.


Steer clear of tall buildings with open windows. Lonely sheeple won't believe the amount of criminality they've been voting for all along. And they won't stand for it once it hits THEIR wallet.