Rising Market a Good Economic Sign
July 28, 2016 at 4:25 p.m.
By Arthur Cyr-
We have just had reconfirmation that the two eras remain distinctively different. As 2012 unfolds, the Dow Jones industrial average surpassed 13,000 for the first time since 2008.
What goes up can and does go down, especially in financial markets. Yet this benchmark event is cause for considerable reassurance about economic trends, especially long-term.
By contrast, the 1929 stock market crash that ushered in the Great Depression was far more severe. From a peak of 381.17 on Sept. 3, the stock market lost 25 percent in value over a tumultuous two days, and then drifted down to a low of 41.22 in July 1932. During the height of the selling frenzy, stocks were traded in volumes not reached again until the late 1960s.
Stocks did not return to the 1929 peak until 1954, in great contrast to our more recent rebound. Great public hostility toward bankers continued to define American political life.
Walter Wriston of Citibank was one of the most innovative commercial bankers of the post-World War II era. He also came from a prosperous family. Yet Wriston noted that for years after the Great Depression he refrained from mentioning his profession in some sectors of society.
Understandable public anxiety remains about banks and financial markets, yet there are reasons for optimism. The principal catalyst of the recent crash was the large amount of bad debt based on real estate, originating in the United States but unfolding globally. Housing markets remain depressed but relatively stable.
Large banks have failed, and others were saved from collapse only by enormous emergency federal fund infusions. Even in the wake of the global crisis, smaller commercial banks in the U.S. continue to fail, though not in large numbers. Federal Deposit Insurance, a New Deal reform, remains essential.
The G-20 major nations engage in continuing coordination of national policies, banks are more strictly regulated and their capital requirements have been raised simultaneously with their rescue. Congress passed comprehensive banking reform legislation, including the important initiative of Paul Volcker to separate commercial from investment banking.
During the Great Depression American humorist Will Rogers became enormously popular. His homespun rural style provided a contrast with the East Coast big-city financiers blamed for the nation’s economic problems.
Inspired by Will Rogers, here are three direct down-to-earth points.
First, as a worker, take pride. The United States – you and me – has the most productive and largest economy in the world. Our estimated gross national product is more than $15 trillion.
Second, as a citizen, be active and alert. Government reforms directly reflect public concerns and fears. There must be sustained public oversight of financial activities.
Third, as an investor, do your homework. A good guide is “Security Analysis” by Benjamin Graham and David Dodd, first published in 1934 during the Great Depression, revised and republished regularly since.
You can even read the book while the TV is on.[[In-content Ad]]
We have just had reconfirmation that the two eras remain distinctively different. As 2012 unfolds, the Dow Jones industrial average surpassed 13,000 for the first time since 2008.
What goes up can and does go down, especially in financial markets. Yet this benchmark event is cause for considerable reassurance about economic trends, especially long-term.
By contrast, the 1929 stock market crash that ushered in the Great Depression was far more severe. From a peak of 381.17 on Sept. 3, the stock market lost 25 percent in value over a tumultuous two days, and then drifted down to a low of 41.22 in July 1932. During the height of the selling frenzy, stocks were traded in volumes not reached again until the late 1960s.
Stocks did not return to the 1929 peak until 1954, in great contrast to our more recent rebound. Great public hostility toward bankers continued to define American political life.
Walter Wriston of Citibank was one of the most innovative commercial bankers of the post-World War II era. He also came from a prosperous family. Yet Wriston noted that for years after the Great Depression he refrained from mentioning his profession in some sectors of society.
Understandable public anxiety remains about banks and financial markets, yet there are reasons for optimism. The principal catalyst of the recent crash was the large amount of bad debt based on real estate, originating in the United States but unfolding globally. Housing markets remain depressed but relatively stable.
Large banks have failed, and others were saved from collapse only by enormous emergency federal fund infusions. Even in the wake of the global crisis, smaller commercial banks in the U.S. continue to fail, though not in large numbers. Federal Deposit Insurance, a New Deal reform, remains essential.
The G-20 major nations engage in continuing coordination of national policies, banks are more strictly regulated and their capital requirements have been raised simultaneously with their rescue. Congress passed comprehensive banking reform legislation, including the important initiative of Paul Volcker to separate commercial from investment banking.
During the Great Depression American humorist Will Rogers became enormously popular. His homespun rural style provided a contrast with the East Coast big-city financiers blamed for the nation’s economic problems.
Inspired by Will Rogers, here are three direct down-to-earth points.
First, as a worker, take pride. The United States – you and me – has the most productive and largest economy in the world. Our estimated gross national product is more than $15 trillion.
Second, as a citizen, be active and alert. Government reforms directly reflect public concerns and fears. There must be sustained public oversight of financial activities.
Third, as an investor, do your homework. A good guide is “Security Analysis” by Benjamin Graham and David Dodd, first published in 1934 during the Great Depression, revised and republished regularly since.
You can even read the book while the TV is on.[[In-content Ad]]
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