Seems like a repeat question that keeps coming up in my financial wellness sessions is, “what was different about the Great Depression than what we are experiencing now?” How about for a start…communication and data!
On January 27th, 1927, two years before the US economy fell off a cliff, inventor Philo T. Farnsworth applied for a patent that is now considered the official birth date of the television. Because this medium was still in its infancy in 1929, radio and newspapers were the only tools with the ability to reach the masses. But as we know, all of these mediums are only good for moving information one way.
This week the government announced a new plan to rid the financial system of so-called “toxic assets”, a general term for assets that have exposed their holders to large losses. It is these assets that have paralyzed both the credit markets and the investor community from moving forward because, to date, no one has been able to determine the extent of their poisonous reach. So to restore some semblance of confidence, the government is proposing to build an entity to capture, hold and somehow try to sell these blemished instruments.
They are telling us that, after months of horrendous news, hints of a return to economic stability created sustained euphoria during last week’s market run-up. The word sustained is used loosely here…it means more than one day. Some large and previously battered financial companies, namely Citibank, Bank of America, and JPMorgan Chase reported that were profitable during the first two months of the year. And, investors all over the globe, who are still licking their wounds after being pummeled by the same market that ruthlessly hacked their personal wealth, now want to quickly make up their losses by getting back on the same airplane that essentially crashed in stormy weather.