As the nation experienced the Great Depression beginning in
1929, Total Credit Market Debt as a percentage of GDP rose
substantially before eventually collapsing. The years following
the '29 crash were characterized by the most dramatic rise in
public debt (and decline in private debt) the nation has ever
seen. Beginning in the 1980's total debt began to expand
dramatically until the Total Credit Market Debt hit 380% of GDP
in early 2009. Subsequently (just like in the Great Depression),
the private debt started to decline while the public debt was
rising. (See attached chart by Ned Davis Research). The decline
in debt/GDP from this level is a signal that we are headed for
another period of apprehension about investing, apprehension
about borrowing, apprehension about the markets and apprehension
about the direction of the country. Extended periods of
apprehension, disinvestment and caution lead to deflation and
deflation is much worse than inflation or disinflation because
the economy, if history is our guid