For the first time in over a decade, the DOW closed below 7,000. For a little history, the DOW was around 1,000 in 1982 and then steadily rose to 14,000 over the course of 25 years. We have now returned 50 percent of that and the future does not look very good for getting it back anytime soon. The Nikai in Japan fell from 30,000 in 1989 to just around 7,500, losing more than 75 percent of its value in 20 years.
What is happening is that we are at the end of an era. It is the end of highways, sprawl, cheap everything, and we are also at a the end of globalization as we knew it.
How to move forward is the $64,000 question. What is clear is that we are just thrashing around, like a whale beached on the shore. There is no one around to put us back in the water. Perhaps the best solution would be for someone to slay the whale. In the Farrow Islands, when a whale beaches they come out with knives, jump on its back, and hack it to death. They have a big dinner of whale meat. In California, they call out a team of doctors to examine it and then it dies anyway. No dinner!
The problem is that everyone (read: economists) studied the 1930s and how to get out of the depression. People forgot that what got us into the 1930s depression was the 1920s! What got us into this depression is the 2000s (leverage, borrowing, housing investment, deregulation) – they were just like the 1920s. One thing is clear, the best way to heal this event is perhaps just to wait it out and not spend trillions and trillions to try and save it. We will heal in due time.