No, it is not like 1983

but for different reasons that the WSJ wrote, yesterday:


Investors Hope It's a 1983 Flashback but...

By MARK GONGLOFF

It's beginning to look a bit like 1983: Stocks are soaring, unemployment is above 10% and the sci-fi TV miniseries "V" is back. Stock investors can only hope for a repeat of that year, which continued the first leg of an 18-year bull market.

(snip)

The market is not nearly as cheap now as it was then. When the 1980s bull market began, the S&P 500 was priced at less than 7 times trailing earnings. Even after a 69% rally, that multiple was just 10 times earnings. The latest rally began with the market at a P/E of 13. The ratio has bloated to nearly 19, compared with its long-term average of 16.

In April 1983, when unemployment was last at 10.2%, it was on its way down. Now it looks like unemployment could rise for months. And when the 1980s rally began, the Federal Reserve's key policy interest rate was 11%, meaning it could simply slash rates to get things moving again. Today, the fed-funds target rate is nearly zero. Baby boomers then in their prime earning and spending years have since lost trillions of dollars in net worth, with uncertain retirement and health benefits.

U.S. consumers in 1983 hadn't yet embarked on a 20-year debt binge. Household debt was 62% of disposable income, a level that had endured since the 1960s. That percentage now stands at 122%, even with debt growth stalled for the past two years.

http://online.wsj.com/article/SB125772177019637211.html (subscription)

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No, 1983 was the start of the decade of greed. We were moving from a manufacturing economy to a service based one. Many employees still had pensions and good jobs.

But then came "Voodoo Economic" (papa Bush was correct the first time) when it was more profitable for corporations to raid other companies, to dissolve the assets - including long time employees - and to use the cash.

Also, when investment bankers and Wall Street Journal were making millions with those mergers and acquisition - win or lose.

And, CEOs were making about 100 the average salary of their employees, while these days they still make 500 and up.

"In April 1983, when unemployment was last at 10.2%, it was on its way down"

If it was on the way down, then why did it hit 10.8% that November?

it is meandering down after that 10.8 peak.

But today, no one really knows when unemployment will at least level off. Some are talking 2010, some - 2011 and worse.

But then, hindsight, as we know, is always 20/20.

:hi:

and sewage lines. We need investment in new businesses. And the only entity that can raise the money is the government. Private businesses simply cannot raise that kind of money.

We should not borrow from overseas. Wealthy people need to have huge tax hikes. That's the only way to force their money to be invested in our country and not overseas. I don't like this solution, but it is the only one I can think of. Actually, it's a pretty bad solution. Wealthy people need to realize that they either invest in the country in which they live or that country is likely to raise their taxes. They can have it either way. As long as wealthy people bet their money on India and China, etc., they are inviting problems here at home. That's not a threat. It is a prediction.

Otherwise the economic conditions are very different. The fed had ammunition to revive the economy in 1983 with interest rate cuts, now the Fed is hamstrung with a ZIRP. M1 money supply shrunk in 1980-1982. We have tripled M1 in the last two years.

Our next crisis will a currency crisis, followed by a hyperinflationary depression.