The Great Depression began on October 24, 1929 when after hitting a peak of 381.14 in September 1929 where upon  the market eventually found its first basement of 198 on November 13th, it had fallen 51% of its high. Today, some 79 years later, basically my parent's lifetimes, the DOW hit a high of 14,164 on October 2007 to fall to 7552 yesterday or 53% of its high water mark. Both highly speculative markets were fueled by bubbles in the real estate markets, generations apart. I think the most daunting picture is an overlay someone made on September 15th from the StockCharts.com.


Now things are not exact but it remains clear that every educated economist and observer understands that the stock market is a reflection to the cumulative and underlying securities value that is based on land or real estate values. Almost all other securities are basically virtual be it corporate and government bonds, shares, currencies, et cetera, et cetera, et cetera.  except land or physical property. My father an old timer cynic who  is moaning seriously about the fact that his assets are eroding around him after a lifetime of amassing a small fortune always maintained that property value has two sets of books was at one time an expert in emenent domain.

If the property is improved or not  there is a market value of what someone will pay for the piece today in relation to the projected value of what someone will pay for it someday in the future if one can hold on to it.  It a speculative value.

Then there is a second value, where if improved what is the cost of replacing that improvement if something tragic occurred like a fire or storm. Regarding raw or unimproved land the first value again applies but the second is a value of what one could do with the land as in developing it.

Once deflationary trends begin they don't stop until there are more buyers coming into the market seeing that there are bargains that far outweigh the risks. This is the same with stocks as it is with land.

Eventually the stock market actually did hit bottom in 1932 at 42 from 381, just 11% of its high three years earlier. It the took the US until 1955 to reclaim that 89% on paper. To me so many things are so similar, like the maestro of Alan Greenspan who schooled America in new-laissez faire economics not unlike the shadow-president from 1921-1932 by the then, Treasury Secretary, Andrew Mellon, once considered the 3rd richest man in America.

Mellons famous four main points fiscal plan (does this sound familiar?)

1. Cut the top income tax rate from 77 to 25 percent
2. Cut taxes on low incomes
3. Reduce the Federal Estate tax
4. Efficiency in government

Is this not Reagan and Bush? Well it gets better when you understand the recent Treasury Secretary Paulson in light of the Lehman Brother's failure the precipitated the most recent market crash: Paulson called it the "Moral Hazard" as a basis not to reward bad banking behavior where Mellon possessed a similar ideal  as the "liquidationist" thesis: weeding out "weak" banks.

The question than is regardless of the macro economic tactics, no matter what someone does how does the economy make up for a Trillions of lost value on land and business securities when actual money was loaned on it?  Somewhere, somehow the books have to be balanced unless you have an entire reset or restart and that is not going to happen unless all the governments fail.