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Old 10-29-2009, 09:43 AM
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ilbegone ilbegone is offline
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Default Some perspective to the Great Recession

80th 'Black Tuesday' anniversary provides some perspective to the Great Recession
Quote:
Matt Wrye, Staff Writer
10/28/2009

This date was Black Tuesday 80 years ago, when the stock market plunged for its fourth day in a row, causing widespread financial panic that helped push America into the Great Depression.

The current recession isn't as catastrophic, but companies and consumers are still licking their wounds from one of the worst economic downturns ever.

After 80 years of booms and busts, have we learned anything?

"Yes, we've learned something," said Jerry Nickelsburg, economist at UCLA's Anderson School of Management. "And we've learned more this time in terms of the financial markets."

Economists and politicians say a recovery is slowly taking shape, and the nation's latest numbers on unemployment, industrial production and consumer spending seem to bear that out.

The Dow Jones Industrial Average - which tracks America's largest 30 company stocks - was on a tear this month as it surpassed the 10,000 mark again, though it had dropped back to 9,762 by the end of trading Wednesday. That's after a tumultuous ride from 14,000 in October 2007 to 6,700 in March.

Of course, the stock market went on a similar roller-coaster ride in 1929.

In the years leading up to Black Tuesday, too many investors threw too much money into the stock market, way too fast. It seemed nothing could stop your Average Joe from turning pennies into wealth overnight.

Sound familiar?

On this 80th anniversary, we're reminded that economic downturns
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are part of American life, whether or not we're prepared for them.

And according to history, a recovery is always around the bend - it's just a matter of time.

Recession vs. Depression

Economic recovery means putting people back to work so they can pay their bills and keep their homes from sliding into foreclosure.

During the Great Depression, it meant bringing the economy to a point where simply putting food on the table wasn't a daily struggle for families.

Pomona resident Bob McAllister, 84, was only 4 years old when Black Tuesday struck.

While too young to remember the newspaper headlines, he experienced his fair share of struggle during the Depression that followed in the 1930s.

"I worked as much as I could in the citrus business," said McAllister, who was raised in Covina. "I pulled weeds, caught gophers, hauled water for spray rigs ... and raised rabbits. I'd sell a rabbit for 50 cents. (People) bought them to eat."

He knew the government-funded Works Progress Administration was putting men to work on civic projects across the nation, but he didn't pay too much attention.

"We were too busy trying to keep our heads above water and taking care of ourselves," McAllister said.

Some might use those same words to describe their situations today.

But Nickelsburg reminds us that the Great Depression was a "completely... different animal" compared to the current recession.

"The unemployment rate was 25 percent," he said. "Industrial production fell by 30 or 40 percent. Today, we're talking about industrial production falling by 5 or 6 percent, and the (national) unemployment rate is still under 10 percent."

Decades later, the government is charting new territory through a $798 billion federal stimulus initiative aimed at jump-starting the economy through infrastructure projects - a tactic similar to those the federal government used in the 1930s.

While millions of federal dollars have been spent on Inland Empire work-force training projects and subsidies for employers' payrolls this year, one of the bigger projects is a $436 million 215 Freeway upgrade, which San Bernardino Associated Governments, the county's transportation planning agency, says will create 8,000 local jobs. Almost one-third of that money is from the federal stimulus pot.

However, even as the economy recovers, the signs of recession loom heavy.

The Inland Empire's unemployment rate was 14.2 percent in September, according to the state Employment Development Department, and the Commerce Department reported the nation's at 9.8 percent.

It took a decade for the country to truly recover from the Depression.

"If you look at the (local newspapers) in the 30s, you'll see them reporting these larger economic improvements," said Bruce Guter, library systems manager at the Pomona Public Library. "But locally, they're carrying ads from organizations looking to help people who were still suffering."

Another stock bubble?

A number of events occurred around 1941 that helped America get back on track.

Not only did Americans buy war bonds, foreigners purchased U.S. Treasury bonds, helping the U.S. government create factory jobs to support the war effort. The unemployment rate quickly shrunk, and the economy started buzzing again.

Today, the government owns billions of dollars worth of stock in the largest banks - an effort to avoid an economic collapse as brutal as the Depression was.

One year after the financial system stabilized from the 2008 failure of Lehman Bros., a global financial services firm, the stock market has reversed its downward trend, with the Dow surging almost 50 percent higher since March.

"Could we be feeling this sense of euphoria? Absolutely," said Tom Powell, CEO of ELP Capital Inc., a Reno, Nev.-based investment firm.

He isn't ruling out the possibility of the Dow dropping to 9,000, 8,000 or 7,000 within the next year.

"How bad could this have gotten?" Powell asks. "Argentina in 2001 is probably our most recent bad economic meltdown. You had an intelligent, educated country in many ways, but their banking system failed. It's eight years later and they still haven't fully recovered. That could happen to us, but it's not likely."

Just looking at the financial meltdown that occurred last year, this recession may "potentially rival" the Great Depression, Powell says.

"Both were caused in many ways by a looseness of credit," he said. "People became enamored with the stock market. The general public was able to buy stock on (credit), which made them feel wealthier."


History in the making

One thing's for sure: This recession is making fundamental changes in people's attitudes about spending, saving and investing in their futures - just like the Great Depression did.

"We've returned to a more normal savings rate to accumulate for retirement and contingencies," Nickelsburg said.

But it's anyone's guess as to how deep or lasting the psychological impact will be.

"Having known a number of people that were young during the Great Depression and having watched many of our current youth coming through this recession right now, if this lasts for a few more years, we could see a very lasting impression - which wouldn't be a bad thing," Powell said.

"But if we see a V-shaped recovery within 12 to 24 months, I don't think anybody will learn any lessons," he added.

James Cobb sees the phenomenon every day.

The investment adviser at Investment Counselors of Redlands said clients' appetite for risk shut down when they realized America was headed for a deep recession.

But people are fickle.

"Now that we're seeing a nice recovery in the stock market, the appetite for risk has come back," Cobb said. "We're having to almost temper clients' expectations, telling them to be cautious because it's not going to go up forever."

Nickelsburg reminds people that recessions are needed, no matter how much we hate them - and we can expect more of them over the next 80 years.

"Economies don't always adjust continuously," Nickelsburg said. "Sectors get out of balance, and corrections are needed to bring those back into balance.

"That's not something that's going away."
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Old 10-29-2009, 07:24 PM
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Cruisingfool Cruisingfool is offline
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My prediction is the stock market is going to crash (and the government knows this, that is why they have been preparing) and when it does, do the words Martial Law sound possible?
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Old 10-29-2009, 10:47 PM
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Jeanfromfillmore Jeanfromfillmore is offline
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My concern is about all that money that's been printed. We haven't hit the bulk of the inflation on the dollar that all that printing will bring . There are signs of it already, just look at the cost of food from just two years ago. But when the true impact of all that printed money does hit us, a much more severe divide between the haves and havenots will occure. Those that are still struggling to hold on to what little they have accumulated will be the worst hit, and the middle class will continue to shrink. You can tell just how strong a countries economy is by what percentage of a families income is spent on food. Pay attention to that and you'll have a very good indicator of how good or bad things in this country are really going. Don't depend on the 'experts' to inform you. Many of those 'experts' don't even know what a loaf of bread or a gallon of milk costs. And if you yourself don't know, it's time you went to the market and got a lesson on what a real indicator looks like.
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Old 10-30-2009, 03:39 PM
Eagle1 Eagle1 is offline
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Default I Predict Hard times Ahead

We have not seen the worst of this yet. Our dollar has beeen devalued. A couple of weeks ago the Canadian Dollar was equal to ours, Russia, China, India, and the Middle Eastern countries are discussing shelving the dollar in preference to a new international currency. Simply put some people are ready to pronounce the dollar as dead.

Gerald Celente, well known economist , predicts riots over taxes, food shortages and the like.

The possibility of rioting over taxes is highly credible given the anger over high taxes by a government that is a world class non performer. In California our state income taxes have just been raised another 10%. This after people have gone to Sacramento in protest of taxes and two million Americans went to Washington DC over the same issue.

After all the non violent methods of addressing a government that will not listen are exhausted then what ?

If the economy worsens with higher unemployment, food and gasoline prices rising there is sure to be a big one in the former golden state.

Don't expect Meg "keep the illegal aliens here because we can't dport them" Whitman to be of any real value here.

Hunker down and get ready.

Last edited by Eagle1; 10-30-2009 at 03:41 PM.
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