No, this is not the next Great Depression
Today’s Economic Crisis is. . .
Like the Great Depression
-The crisis hit Florida before the rest of the nation
(It started here with the 1920s land bust)
-Everyone is invested. Today through our 401(k)s. Back then, through tips and gossip when stock trading was essentially unregulated.
-We suddenly realized there was a whole financial sector that was unregulated (Back then it was Wall Street, today it is credit default swaps and mortgage-backed securities) and that the people running these crazy investments are threatened our stability.
--The Depression was a time of great creativity in literature, photography, music, film and in creating regulations to deal with Wall Street. I predict a lot of creativity is going to be required soon in Washington. I predict Congress and the Obama administration will set off on the greatest explosion of financial regulation since the 1930s.
Not Like the Great Depression
-We have regulation of banks and Wall Street
(The Securities and Exchange Commission was created during the Depression, as were the rules that Investment Advisors, brokers and brokerages must follow, plus all the regulations on what companies have to disclose, plus insurance for brokerage accounts.)
-We have the Federal Deposit Insurance Corp.
(Which went into business Jan. 1, 1934. Since then, not one dime of FDIC-insured deposits has ever been lost.)
-We have a tuned-in Federal Reserve and executive branch
(In the Depression, they raised interest rates instead of cutting them and that made it worse. President Hoover refused to admit the importance of Wall Street’s crash, which pretty much paved the way for a financial disaster to affect the entire economy.)
-We magnify all the issues through the lens of the Internet and the 24-hour news cycle, which can affect public moods but also create demands for solutions that are so big they can’t be resisted. In the Depression, the people were beaten down. And they didn’t have the Internet to use as their loudspeaker.
By the Numbers
Then
9,000 banks failed
26 percent unemployment
Stocks lost 90 percent of their value
Now
22 banks failed this year
6+ percent unemployment
Stocks are down about 40 percent
Harriet Johnson Brackey, the personal finance columnist for the Sun Sentinel, is an award-winning business reporter. Her columns for 2008 were named "The Best in the Business," a national award chosen by her colleagues at the Society of American Business Editors and Writers.
Comments
Thanks for the perspective.
Posted by: Cherrob | November 20, 2008 3:27 PM
"No, this is not the next Great Depression"
You forgot the word YET!!
Posted by: fat and happy | November 20, 2008 8:42 PM
After Iran destroys Israel..there will be only one currency...one religion...and one government....JESUS is coming soon.Be invested in HIM....HE is the only ONE to trust in for our salvation.
Posted by: Alberta | November 20, 2008 9:40 PM
Don't speak too soon. George Bush and wrecking crew still have another two months to make things worse.
Posted by: john q public | November 21, 2008 3:00 AM
Like the Great Depression because the most liquid asset class - stocks - fell to dramatic lows.
Unlike the Great Depression because many people had borrowed money they could not repay to buy those stocks.
Like the Great Depression, poor economic leadership in Washington led to great economic leadership.
Unlike the Great Depression, I'm afraid that ten years from now, maybe sooner, long after the "recovery", many of us will have forgotten this moment in time whereas those that lived through it were changed forever.
Posted by: BlueCollarDollar.com | November 21, 2008 6:38 PM
No, this is not yet the Great Depression. However, the similarities have more to do with human psychology than specific markets.
At some point, we will have to deal with excessive debt, insufficient savings, and unrealistic expectations regarding government intervention.
It ain't over. This could be it.
Posted by: John L. Pehrson | November 21, 2008 7:27 PM
I love that comment. Not YET! It's so bleak, it's hard to look for reasons why it won't get worse. But I'm still looking.
Posted by: Harriet | November 24, 2008 12:14 PM
I recently came across your blog and have been reading along. I thought I would leave my first comment. I don't know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.
Betty
http://www.my-foreclosures.info
Posted by: Betty | December 19, 2008 12:42 AM