Kevin Rudd Reminiscent of Depression-era PM James Scullin


Hey does Kevin Rudd remind you of James Henry Scullin? Reading up on our Australian History we learned that Scullin, Australia’s 9th prime minister, swept Labor into a victory in 1929. Two days after he was sworn in as PM, Wall Street crashed and the Great Depression began.

Incidentally, the crash in 1929 kicked off the Great Depression. But the stock market itself didn’t bottom until 1932, when it reached the lowly level of 41 (after a high of nearly 400.) The Dow climbed down painfully, making lower lows and lower highs every step of the way.

Looking back, we see 1929 as the first panic of one long, continuous crisis. But at the time, most investors assumed it was just a correction. Many made that assumption all the way to the bottom in 1932. The Dow, by the way, did not close about its 1929 high until 1954. Bear markets in an asset class last at least a generation, just ask Japanese real estate investors.

Are we too dreary to start the week? You wouldn’t have guessed anything bad was happening in the world from reading the Australian press. And really, it’s a fair question. Sure, Australia and John Howard have had a good run the last 11 years. But most marriages don’t even last that long these days. Only sitcoms last more than a decade anymore. Life goes on.

Besides, is anything really different today except the names and faces staring out from the front pages of the paper? The markets got the result they expected. You can expect the stock market’s reaction to Saturday’s Labor landslide to be muted. And truthfully, it’s hard to see how Labor and the Liberals are all that different on the economy.

Australia’s economic fate is tied up with China. Love it or loathe it, the government in Beijing has as much to do with Australia’s prosperity as the government in Canberra. If the boom keeps booming, Kevin Rudd and company should have enough money to pay for that AU$59 billion in promised spending. And maybe the surpluses will keep rolling in.

Or maybe not.

Dan Denning
The Daily Reckoning Australia

Dan Denning
Dan Denning examines the geopolitical and economic events that can affect your investments domestically. He raises the questions you need to answer, in order to survive financially in these turbulent times.


  1. I was thinking exactly this yesterday. Prediction: Australia will suffer an economic slowdown due to a US recession and the majority of Australians will not be able to put this into proper context and Mr Rudd will become the scapegoat. After all were taught (or indoctrinated) that the govt RUNS the economy!.

  2. I hope for better from the Aussie population, now that the internet is more readily available. The mainstream media may be muzzled by corporate interests but the blogosphere is lit up with the truth: the bubble economy is bursting all over the world and no-one can stop it.

    I think Main Street has been noticing more and more the discrepancy between what they owe (and make payments on), how long they now have to work to pay for fuel food and home, and pollie/media “prosperity” rhetoric.

    Which is the reason John Howard’s “workers have never had it so good” line didn’t fly. And why his “we can manage the economy better than them” didn’t fly either.

    This bubble took a couple decades (since late 80s/early 90s) to build. It was exacerbated by a little thing called “globalisation”. It’ll take more than a few years to deflate. And the paucity of our pay isn’t going to be lost on most of us as credit dries up, when the debt collectors come a-knockin’.

    Anyone making Mr Rudd – or even Mr Howard – the scapegoat for that should be set straight by (hopefully) the more far-sighted majority. Just as most of us quit believing the “unemployment” and CPI “inflation” numbers some time ago, we know that this problem has been growing for a long, long time.

    I think while most Aussies may be a tad light on the specifics, hopefully we aren’t shallow enough to think it’s all down to whoever happens to be sub-dividing the taxes in Canberra….

  3. For well over 2 years, on my website, I was suggesting that John Howard may suffer the same fate as Stanley Bruce in 1929 when he lost his seat over his industrial relations laws – cp. 1926 and 2006

    Not only is the Scullin Labor Party win reminiscent for Rudd so is Whitlam’s. Below is an extract from my website in this regard:

    The Hawke boom is the primary rhyme for viewing the Howard boom, but the Labor bust associated with the world recession of 1990-91, becomes the tertiary rhyme behind the primary Labor bust associated with the world recession of 1974-75 and the close secondary Labor bust associated with the 1929-33 world depression for viewing the coming Labor bust associated with a world depression…

    Kevin Rudd’s election win in 2007 may have ominous “rhymes” with Gough Whitlam’s election win in 1972 and James Scullin’s election in 1929.

    The Labor party defeated Conservative parties and came to power just as the American post-war booms – 1921-1929 and 1949-1973 – were about to go bust. The Great Depression of the 1930s and the Great Stagflation of the 1970s were arguably the primary reason for Labor being in office for just over 2 years and just under three years respectfully.

    The nominal high in the American blue-chip sharemarket index the Dow Jones Industrial Average peaked six weeks before the Labor took office in 1929 and the Dow peaked four weeks after Labor took office in 1972.

    The fortunes of the Rudd government may therefore depend on the American financial sector. The nominal high of the Dow is likely to occur over the next two years, if it has not occurred already. If “Wall Street” is able to weather the 2007 crises as did in 1927 and 1998 and the Dow nominal peaks in another sharemarket boom then this may be favourable for the longevity of the Rudd Labor government.

    Kevin Rudd is inheriting an economy supercharge by a commodities and stockmarket bubble. This is similar to George Bush inheriting an economy supercharged by the dotcom boom. Clinton and Howard enjoined the bubble years but did not experience, in office, the fall-out from the bust. Rudd to follow Bush?…

    NB. The Scullin (1929) and Whitlam (1972) Labor victories occurred at the end of American booms while the Hawke (1983) victory occurred at the beginning of an American boom.

    NB. The end of the Gold Standard was sealed by the Great Depression; the end of the Bretton Woods quasi-gold standard was sealed by the Great Stagflation and the end of the American Dollar Standard – dubbed Bretton Woods II – will be sealed by the coming Great Depression.

    The Rudd victory, at the end (?) of the post-Cold War boom is similar to the Scullin and the Whitlam victories, at the ends of the post-WW1 boom and the post-Cold War boom respectively.

    The above three wars are turning point wars in the Future Watch “Anglo-American Hegemonic Cycle”, with 1787 as its chosen starting point…

    WW2 begins at an upwave of the cycle while WW1 and the Cold War end at the end of the first stage of the upwave. 1815 and 1865 also marks the end of the first stage upwaves.

    The post WW1 and post Cold War booms will end in deflation, as opposed to the end of the post-WW2 boom of hyper-inflation.

    The end of the post-WW2 boom was not, as mentioned above, at the end of the first stage of the upwave in the Anglo-American Hegemonic Cycle. The second stage – the asset price inflation stage – results in the debt-saturation point being reached in the cycle – which then contributes to deflation. The American Total Credit Market Debt as a Percentage of GDP in 1973 doesn’t rate compared to today and 1929. This along with the inflationary imprint of the Cold War, were arguably, two main reasons why the boom post WW2 boom ended with inflation.

    This implies that the ‘rhyme’ for the severity of the post Rudd election downturn is the 1930s and not the 1970s. In an interview in October on the ABC Dr Steve Keen from the University of Western Sydney pointed out “the levels of personal debt, as a proportion of the economy are now twice what they were during the 1930s”.

    The Australian banking sector in the 1920s was also conservative due in part to the memory of the 1890s bust. The debt levels of today spell big trouble. Taking the 1890s and 1930s into account the Next Great Depression is going to combine the worst features of the last two Australian Great Depressions.

  4. Dans story reminds me of one of my favourite biblical scriptures from the book of Eccesiastes

    “That which has been is what will be,
    That which is done is what will be done,
    And there is nothing new under the sun.
    Is there anything of which it may be said,
    “See, this is new”?
    It has already been in ancient times before us.
    There is no remembrance of former things,
    Nor will there be any remembrance of things that are to come
    By those who will come after.

    Bottom Line – History invariably repeats, but do we ever learn….


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