Learning from the past mistakes of man can really help us to do things better the next time around. Sometimes we have to look at tragedies in the past to prevent them from happening again.
One of the worst economic disasters to look at was the 1929 crash of the stock market. This started the worst economic disaster of the 20th century. The people who bought at the top had to wait decades in order to recoup their losses.
So, What is the real story behind the great depression? This is a common story that appears over and over again. People let their greed get the better of them and bought with both hands, forcing the market to go higher and higher to keep up with demand. As a result businesses could not grow at the same speed as their stock.
Eventually a pullback would have to occur in order to knock the markets down off of their super inflated ego.
When it did, people panicked and sold their stock out of fear. The government refused to acknowledge how bad of shape the economy was in and decided to let it work itself out. This lead to 12 years of the hardest economic times in the 20th century.
So, what did we learn? There are a few things to learn from this. The first thing is that if the government does nothing during economic disasters then we can get hurt even worse. In fact one of the great depression facts was that the government’s failure to step in and save the economy only made it worse. To prevent something like this from happening again the government has to help prevent otherwise strong businesses to fail during economically hard times.
It also shows that buy and hold may work well while everything is going up, but may not always be the best strategy. Long term investors lost their shirts while some traders made it big. Sometimes you have to be more open minded to the bearish side of the market.
The great depression was a horrible time in the world. All we can do is to learn from the past and try to improve the future.
