I just got this email from a loyal reader regarding various pundits call for a depression this month, and it got me to thinking. Many have called me pessimistic, to just come back a year later and call me prescient. I don't think I'm either. I am what you call "realistic". I made a call for global depression 10 months ago, on Friday, 18 April 2008 after going through the events that led into my making a trading error that temporarily dropped my (then) annualized ROI below my 110% target. In the post I made it clear that I felt we were depression bound, on a global basis. See Food for thought, it pretty much lays out where I was coming from.

This is the email that prompted me to reminisce. As you can see, my calls for a depression significantly pre-date many of the pop-pundits. It is not a matter of right or wrong, early or late. I manage all of my assets and net worth myself. I cannot afford to be very wrong, or to be wrong more often than not. Thus, I put a lot of resources, time, thought and energy into being able to see clearly through the fog. If I, and the many gentlemen listed below, are right then we have a very, very tough time ahead of us and thoughts of finding a bottom or going long should be substituted by wealth and purchasing power preservation.

"I thought you might find the following note to be an interesting new spin on things. 

The list of people either calling for Depression, saying we are in a Depression now, or saying a Depression is definitely possible or likely, is growing. It now contains some of the biggest names in business and elsewhere. Below is the list.

Perception is changing. When the likes of the world's 2nd richest man, and the CEO of Microsoft, and Gordon Brown's closest advisor are all saying we will end up in Depression, that has a significant impact on the likelihood that this event will occur. It shapes the perception of the common man.  These are the business leaders of the world. 

I would also just note that something happened around the 1st week of February. That is when most people began making their calls along these lines.

• Nassim Taleb -//- Author ; former MD and Prop Trader at UBS, CIBC, Bankers Trust -//- 10/21/08 -//- "This is probably worse than the Great Depression… I don't know if we're entering the most difficult period not since the Great Depression, but since the American Revolution… More serious than the Great Depression." (source, source)
• Benoit Mandelbrot -//- French Mathematician ; Professor at Yale ; Fellow at Thomas J. Watson Research Center -//- 10/21/08 -//- Listen to source. He says this could be worse than the Great Depression. (source)
• Paul Krugman -//- Nobel Prize winner in Economics ; NYT Columnist ; Professor at Yale, MIT, Stanford -//- 1/4/09 -//- "The fact is that recent economic numbers have been terrifying, not just in the United States but around the world. Manufacturing, in particular, is plunging everywhere. Banks aren't lending; businesses and consumers aren't spending. Let's not mince words: This looks an awful lot like the beginning of a second Great Depression." Krugman says Depression is possible not once but thrice." (source, source, source)
• Nouriel Roubini -//- Professor at Stern School of Business ; President of RGE Monitor ; Former Senior Economist for Council of Economic Advisers under Bill Clinton ; Former Senior Advisor to Tim Geithner in Treasury Department -//- 1/29/09 -//- ""The problem is that even you have the best thing with the best program implemented unfortunately the recession and financial crisis train has left the station," he said. "If we do the right thing there will be slow recovery next year. If we do the wrong thing, we'll have a near-depression."" (source)
• Willem Buiter -//- Professor at the LSE ; columnist at the FT ; former chief economist of the EBRD ; former external member of the MPC ; invited to offer (gloomy) advice to Iceland (source) -//- 2/1/09 -//- "YES WE CAN!! have a global depression if we really continue to work at it… I used to be optimistic about the capacity of our political leaders and central bankers to avoid the policy mistakes that could turn the current global recession into a deep and lasting global depression. Now I'm not so sure." (source)
• Bill Gross -//- Manager of PIMCO Total Return Fund -//- 2/5/09 -//- "Bill Gross, co-chief investment officer of Pacific Investment Management Co., said the U.S. may slump into a "mini depression" unless policy makers spend trillions of dollars to spur growth. "This economy needs support from the government, a check from the government in the trillions," Gross said today in a Bloomberg Television interview from Pimco's headquarters in Newport Beach, California. "There is a potential catastrophe if the U.S. government continues to focus on billions of dollars." " (source)
• Steve Ballmer -//- CEO of MSFT -//- 2/6/09 -//- ""This is a once-in-a-lifetime economic crisis," Ballmer told a retreat of House Democrats in Williamsburg, Va. "There is a lot of history around that, and frankly if you stop and think about it, 1837, '73, '29, 2008, it's almost exactly a whole lifetime between each of the major economic difficulties that we face." Ballmer said that economic growth in the last 25 years was fueled by innovation, globalization, and debt–and that the current levels of debt were unsustainable. "In 1929, for example, just before the stock market crash, the private debt-to-GDP ratio was 160 percent," he said. "Last year, private sector debt as a percentage of the GDP: 300 percent, far more leverage." "In my view, what we now have will be a fundamental economic reset," he said. "The economy is going to have to re-establish itself at a level of spending that reflects the real value of underlying assets before we can all start growing again at a healthy rate." " (source)
• Janet Yellen -//- President of San Francisco Fed ; Professor at Berkeley -//- 2/6/09 -//- "The dynamics of the financial markets as well as the global nature of the current downturn both have similarities to the depression of the 1930s, Janet Yellen, president of the San Francisco Federal Reserve Bank, told reporters after a speech to the 128th Assembly for Bank Directors meeting on the Kohala Coast of Hawaii." (source)
• Dominique Strauss Kahn -//- MD of the IMF ; Professor at 3 French Universities ; former French Finance Minister -//- 2/7/09 -//- "Advanced economies are already in a "depression" and the financial crisis may deepen unless the banking system is fixed, International Monetary Fund Managing Director Dominique Strauss-Kahn said." (source)
• Carlos Slim Helu -//- Mexican Billionaire ; 2nd Richest Person in World -//- 2/9/09 -//- He said this of Mexico: "The businessman Carlos Slim said that the Gross Domestic Product (GDP) will plummet, which will bring unemployment as never seen since the 30s."It will raise unemployment as we had no news in our personal lives, only (in) the history of 30, will break the companies, many small, medium and large, they will close their shops, will be closed by everywhere, the buildings will be empty, "he predicted the employer during their participation in the forum before the Mexican crisis: What to do to grow? "It's a situation that is going to be delicate, I would not be catastrophic, but we must anticipate and prepare for not seeing the consequences and be crying later." (source, source)
• Edward Balls -//- UK PM Brown's closest ally ; currently Schools Secretary ; former chief economic adviser to the UK Treasury -//- 2/9/09 -//- "The reality is that this is becoming the most serious global recession for, I'm sure, over 100 years, as it will turn out." "The economy is going to define our politics in this region and in Britain in the next year, the next five years, the next 10 and even the next 15 years," Mr Balls said. "These are seismic events that are going to change the political landscape. I think this is a financial crisis more extreme and more serious than that of the 1930s, and we all remember how the politics of that era were shaped by the economy." (source)"

Tags: Asset Securitization Crisis, Global Macro, Heard on the Street

This entry was posted on Thursday, February 12th, 2009 at 11:00 pm by Reggie Middleton and is filed under BoomBustBlog. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.