Innovation After A Market Crash

I love history – especially history concerning the stock market and the world of finance. If you do the research you can get a good idea of what the markets are going to do, especially when you can apply a demographic cycle to the equation.

In 2013, as soon as I heard that David Stockman had released a new book… I knew I had to read it. I plowed through it in just five days. I read all 718 fact-filled pages. And I enjoyed the many vivid and interesting stories.

I knew that what he had to say in his book was important because I’ve heard his passionate comments before on television interviews… and when I met him in Fox’s New York studio.

His resume is nothing less than impressive. He’s was the budget director for Reagan and he worked at the highest levels of Salomon Brothers and Blackstone. He started his own firm and he’s been a major private equity investor.

This is a guy worth listening to.

A man with massive real-life experience in the world of politics, high finance and investing.

And it’s for those reasons, we asked him to be the keynote speaker at our Irrational Economic Summit this October 16 to 18 in Miami…

David couldn’t sing my tune on the perversity of government manipulation of markets and the economy more perfectly (what I call “the markets on crack”) if he tried.

David was kind enough to endorse my recent book. He said:

“I have worked at the highest levels of U.S. politics and see a disaster in the making as the government employs endless stimulus plans and bailouts that destroy the very free market capitalistic system that has made it the richest major country in the world. Harry Dent adds the reality of aging societies and slowing demographic trends to show why such reckless debt-driven policies are certain to fail.”

Thank you, David!

And I more than heartily endorse his book, as I have several times in past articles… and as I will continue to do in the future. Let me share some of the insights I’ve gleaned from his book.

War and Innovations

I’ll start today with perhaps the biggest insight I got from his incredible knowledge of the history of government finance in America. That is the underestimated effect World War I had in catapulting the U.S. into the global economy as a major new power and exporter.

The U.S. was an up-and-coming emerging country — much like China is today — after the American and Industrial Revolutions, and especially so as we surpassed England in GDP and began leading innovation in the late 1800s.

I’m talking about the invention of the phone by Bell to electrical innovations by Edison. Henry Ford took the lead in car manufacturing after the invention of the combustion engine in Germany. He came up with the Model T in 1907 and then the assembly line in 1914 — massive long-term innovations. That assembly line didn’t just catapult cars into mainstream affordability, but tractors that caused a farm revolution in productivity. If any single person helped to create the new middle-class factory worker, it was Ford.

But it was World War I that initially allowed the U.S. to leverage our innovations and growing production and agricultural capacity.

Due to the war, the allies suddenly needed our production capacity in these two areas because their attentions were diverted toward their war efforts. This made us a major exporter and catapulted our growth between 1914 and 1920. We also helped to finance that war and that boosted our growing financial institutions.

The When and Why

I always remind my readers of the major deflationary recession that occurred from 1920 into 1921. Everyone knows about the Great Depression, but almost no one knows about the very serious and deflationary downturn that preceded it by a decade.

It was David who gave me new insight as to why commodity prices peaked in 1920 and why such an extreme recession or mini-depression ensued.

After the war ended in 1918, European production and agricultural capacity came back on line. That created a glut in capacity, a drop in industrial and agricultural commodities, and a slowing in world trade.

That setback obviously hit the U.S. the worst. After all, we were the fastest growing exporter at the time.

Without David’s book, I wouldn’t have gained that deeper understanding of events during that time as quickly as I did.

That insight was worth more than the price of the book and the 20 hours it took of my time to read it.

So, I recommend you do the same. Read David’s book.

Even if you don’t have that much time, at least skim through it and find the sections that interest you. You won’t be disappointed.

The Great Deformation is simply the best book I’ve read on the history of finance and politics in America over the last century… and especially how governments have taken the easy way out and killed the very free market capitalist system that has created such unprecedented success in modern times.

David calls it “the corruption of capitalism in America.” I call it “killing the golden goose.”

So, don’t miss David Stockman at our IES conference in Miami this week October 16 to 18. He and I will speak on the first day and have a Q&A after. I can guarantee you it will be lively and provocative!

harry-dent

 

 

 

 

Harry

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Categories: Innovation

About Author

Harry studied economics in college in the ’70s, but found it vague and inconclusive. He became so disillusioned by the state of the profession that he turned his back on it. Instead, he threw himself into the burgeoning New Science of Finance, which married economic research and market research and encompassed identifying and studying demographic trends, business cycles, consumers’ purchasing power and many, many other trends that empowered him to forecast economic and market changes.