Panic!

There's nothing like an old coot telling you he's seen it all before. It's tiresome at some level, but very wise at another--an accumulation of life experiences that shows the eternal verities are basically the same as when Euripides was describing life in the 5th century BC.

Peter Bernstein, author of those bestsellers, Against the Gods and Capital Ideas, is interviewed:

Today's trouble, the 89-year-old Mr. Bernstein says, is worse than he has seen since the Depression ... Before, it was investment that made the V at the bottom of the business cycle. I don't see real investment turning enough without some sign from the consumer side.

This seems rather bizarre, that he is having trouble seeing this cycle turnaround, given he is older than dirt. It's like having a veteran of the French Foreign Legion tell you his paper cut is the most pain he has ever experienced.

GDP growth has still been positive, though it slowed a 0.1% annualize growth rate in the fourth quarter of 2007, and is projected to be slightly above zero in first quarter of 2008. To put the current malaise in perspective, the past GDP peak-to-trough declines have been as follows:

2001: -0.3%
1990-1: -1.3%
1981-2: -2.5%
1974-5: -3.1

and here are the big ones of the US experience:

1929-33: -29% (the Great Depression)
1937-8: -18%

Billionaire investor George Soros believes the current financial crisis is the worst since the Great Depression. The IMF states that US mortgage crisis has spiraled into "the largest financial shock since the Great Depression". Paul Krugman states that "The financial stuff looks like a combination of 1990 and 2001, and probably bigger than both combined." I think housing prices overshot, but these experts should turn off CNBC and look at the bigger picture.