Fascinating comparison from David Rosenberg, as to how the current crisis compares to 2001-02 Tech Wreck and the Great Depression:
Aggressive stimulus will only cushion the blow
So far, the impact to the household balance sheet is double what was created by the 2001-02 tech wreck, and half the loss incurred during the Great Depression.
By any measure, this hole that has been created in the household balance sheet is huge, and history shows there to be a 90% historical correlation between household wealth and the personal savings rate, which is now on a discernible uptrend.
The lagged impact from the unprecedented negative wealth shock on the personal savings rate is likely to be substantial and expectations that the Fed, Treasury or Congress have some magic wand are wholly unrealistic. At best, all the aggressive policy stimulus will do is cushion the blow.
Pretty wild stuff . . .
Focus is on the cure,not the patient
David A. Rosenberg
Merrill Lynch, 08 January 2009