"NOT all of The Great Crash is bad.
If history is to repeat itself, what will follow has to be not only good for the world's economy, but would probably be better than its previous model.
On Friday, on the 79th anniversary of the stock market crash that began the Great Depression, Wall Street joined stock markets around the world in a huge sell-off.
This massive sell-off sent major market indexes to their lowest levels in more than five years, on the belief that a punishing economic recession is at hand.
This fear of economic history repeating itself is part of the dog-eat-dog world of big-time business.
Except, here, we business-types prefer to call it 'creative destruction'.
This is a term first coined by economist Joseph Schumpeter in his work entitled Capitalism, Socialism and Democracy (1942) to denote a 'process of industrial mutation that incessantly revolutionises the economic structure from within, incessantly destroying the old one, incessantly creating a new one'.
In business, creative destruction - not unlike greed - is not only inevitable, it is good.
Creative destruction occurs when something new (usually better) 'kills' something older.
Out of this seemingly merciless destruction, a new spirit of creativity arises.
A great example of this would be the advent of personal computers.
The PC industry - led by Microsoft and Intel - destroyed many mainframe computer companies in the process.
A dozen years ago, James Grant - perhaps one of the wisest commentators on Wall Street - wrote a book called The Trouble with Prosperity.
Grant's survey of financial history basically captures his crusty theory of 'economic predestination'.
According to Grant, we all go through cycles of self-delusion, sometimes too giddy and sometimes too glum.
The consolation is that the genesis of the next business take-off usually lies in the ruins of the last economic slowdown.
Essentially, our economic triumphs and follies will always follow a predestined circular rhythm - one that can be influenced but never be circumvented.
Thus, if things seem dismal now, they will surely get better. Crisis, in fact, spawns opportunities and progress.
And there are enough heroic examples from history that might encourage you.
Walt Disney, for instance, lost an acting job as a movie extra and started his famous cartoon company in a garage during the recession of 1923-1924.
Years later, in 1938, William Hewlett and David Packard teamed up in Silicon Valley during the Great Depression.
And then there's Bill Gates. He dropped out of Harvard College to launch Microsoft during a downturn in 1975.
The recent bailout events - the stock market's wild swings - have thrust everyone from Seattle to Singapore into a debate about the risks of another Great Depression.
Has enough been done to protect the economy? Who or what caused this mess? Also, what does all this mean?
If you must know, it means that, in terms of the stock market, the Dow Jones industrial average will again find its way back down near 7,000 to see whether that is the new floor, or if it is somewhere even below that.
It means, buckle up, we're in for a lousy economy.
And it also means the financial sector is not out of the woods and more banks could get in trouble.
Rest assured, however, after a recessionary phase, the expansionary phase will start again.
After all, in the repetitive circle of business life, bad times can only breed good.
Something you can, most definitely, count on."
The reason this article caught my attention was because it has some similiarity to my post
http://moneythology.blogspot.com/2008/08/rise-and-fall-of-economy.html
In that post, I highlighted the rising and falling of economies as an inevitable phenomenon.
No comments:
Post a Comment