Commodity Trading & Trend Following

There exist many similarities between the current economic debacle and the Great Depression of 1929 ( however we are not at 25% unemployment and many other aspects).Speculation and a failing banking system was a common theme to both situations. A lack of regulation contributed to both situations. Cheap money and leverage are now only seen in retrospect.There were those who bought multiple houses for speculation with no money down and the public in FDR’s days bought stock on crazy margin.In both cases total disrespect for risk.
Roosevelt faced great controversy over his programs at the time. The New Deal represented a massive shift in political and domestic policy in the U.S., with its more lasting changes being increased federal government control over the economy. There were calls of socialism and even communism. Besides the common dispair in both economic situations, FDR and Obama both had/have the talent of charisma. Masses showed up in Washington for Obama’s inauguration. FDR held fire side chats to comfort the public.

As much as things are similar they are different. The world today is more complex. We have derivative products that no one knows how to evaluate and a world economy. FDR did not have that. One distinct difference was the attitude of spending. FDR was uncertain initially. The choice for FDR was not so clear and it seemed/seems that neither president had an obvious path to success. In FDR’s days his loyal advisers John Maynard Keynes suggested that he should spend more to revive the U.S. economy. However FDR did not initially agree and actually cut federal spending in 1937. He eventually did spend and initiated many drastic programs. What is fascinating is that Obama seems to be taking the advice of those who served under FDR “SPEND”! Both Obama and FDR are/were confronted from competing pressures over whether to spend more money or cut taxes. Contrarily Obama has taken the route to spend without any hesitation. There are no easy answers, Where is the money suppose to come from? When will the FED start paying attention to the deficit. Yesterday we saw a knee jerk reaction of inflation. Commodities flew off the charts and the US dollar got hit. The fact is all this spending long term is unsustainable and inflation is a natural outcome. Inflation itself is a wealth destroyer. Which is worse the medicine or the disease?

In retrospect the real question was it FDRs programs and public works that got the US out of the Depression or was it World War 2?
The need for manufacturing and military spending was an impetus. Gd forbid we have to have another World War to get us out of this economic disaster. What do you think?

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