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Hal's Column
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Saturday, September 20, 2008, 3:00 AM
Looks like 1929 all over again By Hal Tarleton | Daily Times Opinion Editor Is this what October 1929 felt like? At that time, stock prices began to slide, and the Dow Jones Industrial Average fell from its Sept. 3 peak of 381.17 and fell and fell. There were upticks along the way, but the trend was downhill. The Dow lost 12 percent on Oct. 28 and 13 percent on Oct. 29. The Dow reached its low point in July 1932, at 41.22, a decline of 89 percent. This was the beginning of the epoch we now know as the Great Depression. Industrial production fell. World trade declined. Unemployment soared. Banks failed. Families were left destitute. America is a long way from the economy of the 1930s. Wealth is more evenly distributed. Amenities once thought of as luxuries are now commonplace. Food is abundant and affordable. Regulatory agencies keep watch on banks and other institutions. But events of the past few weeks have been enough to remind anyone with a sense of history that the Great Depression was less than 80 years ago. Many among us remember what it was like. Ripples of the 2008 economy mirror the sudden declines of 1929. This year: * The federal government rescued investment banker Bear Stearns; * Fannie Mae and Freddie Mac, the two mammoth mortgage financiers, have essentially been taken over by the federal government after losing billions on bad mortgage loans. * Some banks have closed across the country, primarily because of bad mortgage investments. Thanks to federal deposit insurance, most depositors were fully covered. The lines of depositors arriving to withdraw their savings were reminiscent of the 1930s. * Merrill Lynch, the brokerage that was the face of Wall Street in many towns across the country, was purchased by Bank of America Monday. * Insurance fund AIG is now 80 percent owned by taxpayers after an $80 billion bailout. Let it be noted that Bear Stearns, Lehman Brothers and Merrill Lynch all survived the Great Depression, only to be done in by what's happening now. One difference in today's economy compared to 1929's is how many middle class Americans are invested in the stock market in the form of 401(k)s, IRAs and similar retirement plans. This week's 1,000-point drop in the market will make retirement that much more difficult for millions of Americans. Economic autopsies of the Great Depression mostly blame inept government regulation, over-speculation and too-tight money policies of the Federal Reserve for the downturn that didn't end until World War II ramped up production and put everyone back to work. When the post-mortems are written of the 2008 collapse, soaring federal deficits, borrowing to fight a war in Iraq, inadequate government oversight of the finance industry and foolish mortgage policies will be among the culprits. America and the world may not be headed for another 12-year period of stagnation and decline, but we almost certainly face some tough months, maybe even years, ahead. A new administration coming aboard in January will have to find a way to eliminate the budget deficit, stimulate the economy and restore America's confidence. Who will be up to the task? tarleton@wilsontimes.com | 265-7812
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