Tano Capital Releases White Paper Comparing and Contrasting the 2008 Stock Market Crash with the 1929 Stock Market Crash

SAN MATEO, Calif. (PRWEB) November 14, 2008

“The Crash of 2008 vs. 1929: Similarities and Differences” examines the underlying dynamics of the 2008 global economic crisis against those in 1929. The paper explores the roles played by the Federal Reserve Bank and the Treasury in both the 1929 and 2008 crises.

Some excerpts from the actual paper:

The theology of free markets and lack of direct government intervention in the markets were deeply ingrained fundamentals of the Republican Hoover Administration. Hoover’s first plan of attack to the Crash was to exhort verbally businesses and individuals to accept personal responsibility to expand in order to forestall further economic collapse. He did push through a tax cut of 1%, but almost all of his subsequent “assistance” came through jawboning participants and not direct action and intervention

Treasury Secretary Mellon consistently advocated the total liquidation of labor, stocks, farmers and real estate, to reset the economy and start over. He reinforced Hoover’s emphasis on maintaining a balanced budget regardless of the cost to the real economy

The Federal Reserve displayed no pro-active leadership during this period, and clearly felt that preserving the credit of the overall banking system was beyond the purview of its mandate. The “lender of last resort” was considered to be the bond markets, not the Fed

Investor’s attitudes were still bullish in the first half of 1930, and they were all sucked back into the market just in time for its next wrenching decline. They were all caught up with backward focused memories of what prices and earnings had been. Earnings that came out in the first half of 1930 still looked pretty good on their face, mostly because they incorporated a large part of 1929 in them

major difference between 1929 and 2008 is in the overall health of the financial systems. In 1930, as we have seen, the administration ran a balanced budget, the United States was the business leader of the world, and business itself was conservatively financed and had not over expanded, as had the stock market. The dollar was strong and the nations’ gold supply was large. In 2008, in contrast, we face instead a veritable mountain of debt, much of it of the “toxic variety” across all sectors of the economy, from government to corporate to the consumer

global markets are now very intertwined and interrelated, as can be seen from the chart below, but we believe that they will begin to decouple and trade more independently as a direct result of the crash of 2008

Fifth, commodity prices have collapsed just like they did in 1929, with almost identical percentage declines this far into the crash. The markets are rapidly discounting the implosion of corporate activity and the likely outlook for future earnings and profits. The difference between now and 1929 is that there are still economies that are growing globally, such as India and China, and while demand for commodities may cool for some time, the reflation-commodity scarcity theme will come back in spades. It has to

Tano Capital, LLC is an alternative asset management firm, founded by Charles E. Johnson (formerly Co-President of Franklin Templeton Investments and CEO of Templeton Worldwide), that makes private equity investments into rapidly growing private companies in India and China. Tano Capital currently has offices in Mumbai, Shanghai, Taipei, Tianjin, Mauritius and San Mateo. To view the full version of the white paper, please visit Tano Capital website at http://www.tanocapital.com.

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