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What a Crash Looks Like
Here's
a nice graphic from The Big Picture website:
Today’s chart illustrates that 12-month, as-reported S&P 500 earnings have declined over 80% over the past 18 months, making this by far the largest decline on record (the data goes back to 1936). In fact, real earnings have dropped to a level not seen since the 1930s and 40s – the back end of the Great Depression. While earnings have been struggling since Q3 2007, it was the latest quarter (Q4 2008 the first full quarter following the financial meltdown), where the real damage was done. During Q4 2008, the S&P 500 came in with its first negative earnings quarter ever and the amount lost during the quarter was more than the index has ever earned during a single quarter.
2 comments:
hyperinflation on Weimar scales is on the way thanks to Helicopter Ben!
http://tinyurl.com/clck4y
mB
In a sense that's what last week's sharp drop in the US dollar and the surge in the gold (and materials prices) indicate. That was the response to the $1 trillion "quantitative easing" (aka, running the printing presses).
I don't think we are headed for hyperinflation. I do think that with luck it can be managed as just moderate inflation. The economy definitely needs modest inflation right now to give the Fed more wiggle room. The trick is that as you "print money" those dollars will chase goods and send prices higher. But prices are somewhat sticky and wages are much more sticky, so there is some room to maneuver, but the Fed has to be very adept.
The Feds inability to forsee the financial crisis and the US Treasury's inability to come up with a bank plan don't give me a great deal of confidence that they will have the required finesse.
I am heartened by Paul Krugman's confidence in Ben Bernanke. I have very little confidence in Geithner.
Let's hope that the worst is avoided. We are like the Titanic scraping by that iceberg. I'm hoping the rivets hold!
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