03-24-2020, 08:19 PM
** 24-Mar-2020 World View: The Principle of Maximum Ruin
I had forgotten about the Principle of Maximum Ruin. It's worthwhile
quoting again the excerpt from John Kenneth Galbraith's 1954 book
The Great Crash - 1929, which seems to have a mystical quality
that makes it more and more meaningful each time you read it:
So millions of people are being screwed once again, by the Principle
of Maximum Ruin.
Higgenbotham Wrote:> I would add re the above story and the idea of Maximum Ruin.
> The economy and stock market have probably gone down enough that
> most people near retirement will not be able to, even if they
> thought based on 2019 end of year values that they would be able
> to.
> In the meantime, those who thought they could bet on a bad stock
> market or gold as their ticket to retirement won't be able to
> either or at least any time soon because the faux good times
> lasted so much longer than any reasonable person would have
> thought.
I had forgotten about the Principle of Maximum Ruin. It's worthwhile
quoting again the excerpt from John Kenneth Galbraith's 1954 book
The Great Crash - 1929, which seems to have a mystical quality
that makes it more and more meaningful each time you read it:
Quote:> "A common feature of all these earlier troubles
> [previous panics] was that having happened they were over. The
> worst was reasonably recognizable as such. The singular feature
> of the great crash of 1929 was that the worst continued to
> worsen. What looked one day like the end proved on the next day to
> have been only the beginning. Nothing could have been more
> ingeniously designed to maximize the suffering, and also to insure
> that as few as possible escaped the common misfortune.
> The fortunate speculator who had funds to answer the first margin
> call presently got another and equally urgent one, and if he met
> that there would still be another. In the end all the money he
> had was extracted from him and lost. The man with the smart
> money, who was safely out of the market when the first crash came,
> naturally went back in to pick up bargains. ... The bargains then
> suffered a ruinous fall. Even the man who waited out all of
> October and all of November, who saw the volume of trading return
> to normal and saw Wall Street become as placid as a produce
> market, and who then bought common stocks would see their value
> drop to a third or fourth of the purchase price in the next
> twenty-four months. ... The ruthlessness of [the stock market was]
> remarkable." (p. 108)
So millions of people are being screwed once again, by the Principle
of Maximum Ruin.
