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Or any other month you choose.

I am currently re-reading "The Great Crash" by John Kenneth Galbraith, which explains the origin and effects of the stock market crash which caused a global depression.

Boiled down to the essence, the crash started with a manic rise in the stock market exaggerated by leverage made available by a massive gushing of money, supported by 90% leverage through "brokerage loans" (now simply called margin). In many cases, the prices of shares became completely detached from the underlying asset base and it became the share certificate itself which was the commodity being sold at ever-increasing prices.

With the advent of cryptocurrency, the relaxing of bank reserve requirements, the reduction of interest and the ability to leveraged investment through derivatives, we are seeing a condition which rhymes the late 1920's.

Just remember, when it hits the fan hard, everything gets covered in crap, whether good, bad or ugly. If you have not sold by then, there's no point in selling as the cow has left the barn - and all you can do is outwait her coming back. Those whippersnappers amongst us who are too young to have lived through a major stock slam combined with a financial panic (the one during COVID was a pygmy in comparison) should do some introspective candid evaluation as to what their pain threshold is if their wealth on paper was to precipitously take a double digit dive.

Eat, drink and be merry ...

Jeff

It's worth remembering that "Cash Flow is King."

A crash like the one you describe usually is followed by a recession which reduces the profits of many companies. Even Dividend Aristocrats may cut their dividend at the same time that the price of the stock falls. (Remember General Electric in 2009.) Also, stagflation may result as happened in the 1980-82 recession.

The truly risk-averse will make sure that their expenses are covered by cash or by inflation-adjusted sources of income like Social Security and TIPS.

Wendy

I forgot to mention...

You would probably enjoy "Manias, Panics and Crashes," by Kindleberger and "This Time is Different," by Reinhart and Rogoff.

Wendy

Jeff

1. What are the odds we default on the national debt?

2 Regardless of the blame, what are the odds that much of the social net is retracted? More importantly, what are the odds that the FDIC is stripped away?


They won't default on the debt and then take on trillions in new debt to honor the FDIC.

They won't default on the debt and then take on trillions in new debt to honor the FDIC.

If they do not back the FDIC, they will have major losses all over Congress in the next election. People will lose money deposited in the bank--that is confiscated by the govt by failing to honor/support FDIC. The AIG bailout will be puny in comparison, as the FDIC is nationwide and will impact tens/hundreds of millions of voters "in their pocketbook NOW".

The vast majority of US debt is held in the US by people living here. Whoever chooses to default on the US debt will have a VERY hard time in any election because the VOTERS who are depending on that money for retirement and other uses will vote against them en masse.

https://www.cnn.com/2025/09/18/business/us-k-shape...

As of June 30, the top 20% of earners (those who make about $264,500 a year) accounted for more than 63% of all spending, and the top 10% (those who earn more than $353,000 a year) accounted for more than 49% — both the highest on record, according to data that goes back to 1989. In 2019, during the comparable period, those shares were 59.2% and 44.6%, respectively.

“If [the top-earners] turn more cautious in their spending, for whatever reason, the economy will suffer a recession,” (Zandi said). That could happen if there were a significant correction in stock prices, he said, since much of the wealth that fuels spending by those “well-to-do” individuals is tied to the robust financial markets.

The wealthiest households accounting for an even greater share of US spending growth is causing upward pressure on inflation and spurring speculative bets that could foment asset bubbles. That could make the United States more vulnerable to a potential recession in the process, but it also risks setting back some Americans for years to come.

As far as answering Timer321 (just one guy's opinion, but what the heck):

The US will not default. What they are likely to do is to inflate the currency to the point that, if they cannot keep the refinancing game going forever, they will pay off the bonds with nominally worthless currency.

Historically, FDIC deposit insurance levels have been increased several times since its creation in 1933. The coverage began at $2,500, quickly rose to $5,000 in 1934, and then to $10,000 in 1950. Subsequent increases brought the level to $15,000 (1966), $20,000 (1969), $40,000 (1974), and then to $100,000 in 1980. The most recent adjustment set the standard insurance amount to $250,000 per depositor, per insured bank, for each account ownership category, which was enacted in 2010. If you graph against inflation, it's always been about the same relative value (they should eliminate the nickel and dime along with the penny and maybe bring out a $5 coin while they are at it). You might find that if they keep it at $250K it might buy a Big Mac - who knows).

Just remember - the currency carry trade favors major currencies with the highest interest rates.

Jeff

Late 1890 tariffs caused 1893 depression. Who says it all goes bad in 2026.

I was for a while saying 2026

The US will not default. What they are likely to do is to inflate the currency to the point that, if they cannot keep the refinancing game going forever, they will pay off the bonds with nominally worthless currency.


The Titanic was the best ship as of 1912 that had ever been built.

We have problems that are becoming insurmountable. Deflation. Rising unemployment because of tariffs that now has the FED lowering rates while inflation blipped up.

Powell sees risk in all directions. The iceberg is surrounding the global economy.

"The Crash" is an outstanding and highly readable book.

Just remember - the currency carry trade favors major currencies with the highest interest rates.

Argentina's rate is 29%, and Russia's is very high. I see the trade, but no one should make that trade.

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