I can’t believe that people are saying that the current economic crisis is like the great depression of 1929. As soon as we get something big, it’s the end of the world. As if humanities never face what is happening before…
The current market drop will surely be highlighted in our children history books as an important year where several investors lost money. However, we are nothing closed to the great depression of 1929 and here’s why:
The Unemployment rate
Did you check what the unemployment rate was during 1929 to 1934? It was between 25% and 35%. We are currently surfing between 6 and 7%. Therefore, people are still working, still paying their bills and still eating. So there is no panic on this side.
Many Government interventions
This part is actually quite interesting. Back in 1929, the government believed in the force of a free market and decided to stay on the side and watch the game. They actually increase the interest rate to stop the inflation which killed several companies and increase the size of the actual recession. Today, we have Obama with is XG$ plan to inject money into the economy and invest in several industries. All governments are acting much quicker this time.
We are not even closed to a depression
By definition, a depression is a huge recession. Our economy is actually slowing down by about 1% which is minimal. So we are “technically” in recession but the bottom line is that there is a good chance we get out of this quite easily. Why? Because interest rates are low and that there is a huge amount of money sitting on the side line into money market funds. Investors are waiting for “the good sign” before coming back into the market.
The real question is “if you know when is the best time to get into the market, why didn’t you do it in the past?” or “why were you in the market when it went down if you knew all of this?”. Nobody knows. However, I can tell you that if you are sitting on the side, you will definitely watch the parade and not be part of it!.
In the end, I really don’t think that we will get into a great depression. I also think that we are in the middle of a real and important economic crisis. However, there are several reasons why we can get out of this market no latter than this year! I still wonder; Why the hell it has to be different this time? Why isn’t this just a normal bear market after a very bullish one?
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