I didn’t like the Great Depression economic analogies so prevalent when George Bush was still President. The comparison was used by people who hated George Bush regardless of his policies.
Much to my dismay, we do seem to be repeating history. First…take a look at this chart below. It compares that DOW Jones crash of ’29 with our current bear market. The depression era chart starts on Oct. 1 1929. Today’s chart starts Oct. 1, 2007.
Click to enlarge
There are many other similarities besides the stock market. It was triggered by a bank problem; 1929 had a stock bubble, 2007 had a real estate bubble. A Democrat replaced a Republican. The Republican was falsely accused of laissez-faire policies. Politically, there was a push for trade protections, strengthening of labor unions, government micromanagement of business and governmental demonization of private citizens.
There are many other factors that are not the same, so there is hope that we will avoid the another historic 1000 day bear market. For instance, Hoover cut spending to avoid deficits. Neither the Bush Administration nor the Obama Administration even considered spending cuts. Also, we were on the gold standard back in the 30′s. That limited the government ability to control the money supply…even if they were inclined to do it. So there are significant differences. It would be encouraging if there was evidence that our political “leaders” studied history.
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[...] in March of 2009, I compared the DOW during the Great Depression to today. I worried we were repeating history. In review, I see no [...]