It's easy to describe the current economic crisis in dire, even cataclysmic terms because the effects are very real to us right now. As we try to make sense of what's going on, we look back at the past and filter what we see now through the patterns of events we know from history. Human beings have a great, though sometimes irrational, fondness for patterns. They are a comforting reassurance of order in a world we cannot control.
That's why it's not surprising to see comparisons being made between our own times and the Great Depression, particularly in the press. The economic crisis of the 1930s looks like the best comparison for own experiences today. The appeal of gloom and doom stories suggest that a guarantee of utter catastrophe is more appealing than the bittersweet mix of hope, anxiety and striving that surround uncertain success. It's the wrong frame of mind to get stuck in and not just because it's a self-fulfilling prophecy. It' factually incorrect! Consider the following:
The Stock Market
The plunge that began on Thursday, October 24th, 1929 resulted in a loss of 89% of the market's value. In 1987, the market fell 25%. The recent market sell-off resulted in a loss of 20%.
Unemployment
In 1930, unemployment was 25%. In 1990, the national average was 6% and remained stable throughout the crisis. The gloomiest forecasts for 2009 project 7% unemployment.
Bank Failures
In the year following 1929, more than 5,000 banks failed and depositors lost all their money. Ultimately, by the 1940s, more than 9,000 banks failed. From 1986 through the end of 1989 over 650 Savings and Loan Institutions and 1,530 banks failed. Since July 2008, eleven banks have failed.
Government Response
In 1929, the government deepened the crises by allowing banks to fail with depositors losing all their cash. In 2008, our government immediately and massively intervened by extending capital to banks, increased the money supply, and, as the recent G8 conference showed, international leaders are cooperating on monetary policy and lowering trade barriers.
Statistics courtesy of Rubloff Residential Properties, one of our Leading Real Estate Companies of the World affiliates in NYC.