What I’ve Learned About 1929.Posted: October 12, 2008
On Friday, I thought it was finally time I learned about what really happened in 1929, since we seem to be celebrating its anniversary.
What I learned surprised me.
Despite our collective sense of history, the market did not really crash disastrously in 1929. It lost about half its value, but by a year later had regained half that. By 1930 it was down only 25% from its high—quite a bit better than the 40% loss we’ve experienced in the last year.
Ah, if only that were the end of the story. But it wasn’t. In 1931, the market began to slide again. For two years, it declined steadily. There was no crash—but due to consistent losses, the market by the end of 1932 had lost 89% of its value compared to its pre-“crash” high in 1929. That was a disaster.
So, 1) the events of 1929 weren’t cataclysmic, and 2) the actual cataclysmic events, which didn’t happen until 1931-1932, didn’t come as one big “crash” but as a steady, nauseating erosion.
It turns out that our imaginary, collective “Complete Idiot’s Guide to The Stock Market Crash” isn’t right.
None of this means that history is going to repeat itself. Some important things are different now. World governments today seem to understand the necessity of getting ahead of the crisis. We just might end up OK this time around. For us, as ordinary citizens, to be unworried would be delusional, but my gut tells me there’s cause for hope. Call me a cockeyed optimist.