Below is a graph of all the major stock market collapses in the 20th century – starting with the crash of 1929 and the Great Depression and finishing with the bursting of the .com bubble in 2000.
The graph shows that the usual bottom of a bear market has been about 50% lower than the preceding stock market high. The only exception is the crash of 1929 where stocks initially fell 47.9% but then dropped thanks to the Great Depression to about 90% of their initial value.
The interesting thing is that thanks to the current financial turmoil the S&P 500 has already dropped 48.5% from it’s high this year.
If history ever teaches us anything it seems to indicate that we are currently in a crossroad – is this the point where the markets will turn around or will we go on to see a second Great Depression?
Click for a larger picture
While no one can know for sure what will happen next, it seems that thanks to the unwillingness of banks to lend money, that the current financial crisis is turning into an economic crises that will bring on another Great Depression.
3 Facts about the Great Depression
- 25% of people were jobless.
- Food riots throughout the US – Grocery shops got looted because hungry people do whatever it takes to get something to eat.
- People who lost their homes lived in tents and erected camps near the White House in Washington to get relief.
What do you think – will we have another depression or will everything be OK soon?
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