Financial History Tells a Tale
There's been quite a bit of talk lately at my office, and probably at every cubicle in the nation, about what is to come in the financial realm. Lot's of comparisons to the past, Great Depression of 1929, Panic of 1873 and the like. I'm all for studying the past so as not to suffer past fates in the future, but the key is to actually study all factors in these events and compare them to all factors of the present.
As I mentioned in a previous posting, economics is a bit of an art. It does not work precisely, like mathematics, because economics involves a myriad of factors. In comparing the past to the present, you must consider a myriad of factors in order to come any where close to a good guess at the future.
The Wall Street Journal offered an excellent little piece today by Jason Zweig, which comments on just this subject. Zweig points to that where do you go with your money mindset of todays investor, hurt by most all investments, cautious of most all possibilities. The thought of pulling out your IRA and hiding in your mattress, a real possibility 80 years ago, is not even in the mindset of most investors today. Considering this, how does a run on the banks begin?
Friend and fellow blogger, Dave Harper, puts forth that if it starts somewhere in the world, mass media will have it in everyones face before the day grows long. He has a point, but in this instant of time, there is money waiting from may sectors, both government and private.
Our government has already spent near the proposed bailout amount on wars in Afghanistan and Iraq. What would doubling down on a financial bailout really do to the economy? How much non-existant money can a government spend before their currency becomes nothing more than fancy paper?
All good questions and thoughts, many, many factors to consider, no crystal ball into the future of our economic status as a nation and world.
My suggestion, as an individual investor and citizen, you should keeping reading and studying everything you can. Take it all in, weigh it by validity and don't act on impulses.