Three Cases: 1942, 1949 and 1971
(C) 2009 William Schmidt, Ph.D. www.tigersoft.com
Bottoms in bear markets usually require months of basing or at least a double or a triple
bottom. There are exceptions. These seem to be when there are abrupt political or military
changes. The June 4-7 Battle of Midway, the end of the Berlin Blockade on May 11th and
Nixon's ending of emmergency Wage and Price controls in his New Economic Policy.
Battle of Midway
Ending of Berlin Blockade
Nixon's Economic Policy(Source below - http://en.wikipedia.org/wiki/Nixon_Shock )
Nixon New Economic Policy Shock: 1971
By the early 1970s, the Vietnam War had greatly accelerated inflation.
The US was running a balance of payments deficit and a trade deficit
(for the first time in the 20th century). In 1970, U.S. gold coverage of the
paper dollar deteriorated from 55% to 22%. In 1971, more and more dollars
were printed and then sent overseas, to pay for the nation's military expenditures.
In the first six months of 1971, assets for $22 billion fled the United States.
Other nations increasingly demanded fulfillment of America's "promise to pay"
gold for dollars. France, in particular, made heavy and repeated demands
for gold in place of the dollars. On August 5, Congress released a report
recommending devaluation of the dollar.[1]
In response to these events and to polls citing a 73% disapproval of his
policies
the year before an election,[1]
on August 15,
1971, Nixon unilaterally
imposed 90-day wage and price controls, a 10% import surcharge, and
most importantly "closed the gold window," making the dollar inconvertible
to gold directly, except on the open market. Nixon's New Economic Policy
was a shock. It was done without consultation with Allies. It won popularity,
from those who disliked price-gougers. The surcharge was dropped in
December
1971 as part of a general revaluation of major currencies. The lifting of these
controls then again allowed profits to be maximized.
