Posted Feb 3, 2015 by Martin Armstrong
Hello Mr. Armstrong,
I am reading Hoover’s memoirs to get a better handle on how he saw capital move during the Great Depression.
I understand the Great Depression began its crash in October of 1929, affecting global markets for the next ten years.
If this is not too much to ask of your time, I would like to ask if you could please explain what happened during that time period, 1929-1933 and what catalyst caused the foreign sovereign bonds to default on Americans causing massive bank failures. Did rates rise during that period as well? How did the dollar react? What were the 3 waves of panic?
Today we see that bonds are rallying and stocks are falling, as occurred on 1929. How will we know that the stock market will not crash when bonds do?
Thank you again for your wonderful service.
ANSWER: Hoover’s 1931 chapter has all the letters going back and forth between heads of state at the time. The Greatest Bull Market will be released in its new form. I added about 500 pages (50% charts) on just about everything. This is how the dollar soared. Although the Dow crashed from 386 to 42 between 1929 to 1932, there were many other factors involved. Adjusted for currency, the Dow really fell to about 72 in international terms.
The default of Credit Anstalt in Austria which set off the sovereign debt default cascade failure was partly owned by the Rothchilds. This shook the very foundation of confidence. They capital turned against Germany and kept on going hitting even Britain. Each government was forced into default. This drove capital into the USA as we are witnessing to a modest extend right now thanks to the Euro.
We will see the stock market rise as bonds decline only after capital begins to smell the crisis in government bonds. Much will be lost and trapped. Nevertheless, the smart money will begin the shift. We can see how things shifted whereas the spread or premium of corporate debt over government declined illustrating the shift in capital flows.
As long as the stoke market does not make a spike high into September, then we should see the rally unfold AFTER 2015.75 As the market rallies, the Fed will break ranks and raise rates becoming more concerned about a domestic bubble. Of course raising rates will only draw in more foreign capital and the rise in the dollar will set in motion more sovereign debt defaults in emerging markets who borrowed in dollars. They will find themselves in the same position as Greece, Unable to repay loans that have appreciated.
The wave formations and lot more are explained in the new version of the Greatest Bull Market in History. We hope this will be out by the end of the summer.