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Jason Zweig: There Is No ‘New Normal’ Economy

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The always interesting and sometimes contrarian Jason Zweig writes on Total Return, The Wall Street Journal‘s personal-finance blog, that the so-called new normal ain’t all that new.

While not exactly a “sacred cow,” PIMCO’s theory that investors will experience higher volatility and lower global returns for the foreseeable future has gained widespread acceptance as problems in Europe persist and threats of a double-dip recession loom.

“Are the latest swings in the economic and financial headlines making you wonder when it will ever stop?” Zweig asks.

“The short answer is: It will never stop. And what’s been happening isn’t “the new normal”; it’s just the old normal playing out before a new audience.”

Zweig does little more than take a stroll down Memory Lane to make his point, noting that in 1936, Merle Hostetler, an economist at what is now Case Western University, designed an annual timeline of American finance that runs from 1861 through 1935. The research is meticulous, so much so that the St. Louis Fed has made the entire presentation available online (complete with pictures of the worn and yellowed original text).

Zweig points to one time period in particular:

“We all know the past few years have been terrible—but just get a load of 1893, when business activity hit its lowest levels in 50 years, more than 29,000 miles of railroads went bust, and 158 banks and more than 15,000 businesses failed.

“There was some good news that year, too, of course: Edison perfected the movie camera, and the number of telephone subscribers in New York surpassed 9,000.”

So, as with Sir John Templeton’s four most dangerous words in investing (It’s different this time …), Zweig effectively illustrates that maybe—just maybe—it isn’t.