The Great Depression and What We Can Learn From It

The Great Crash of 1929 was the most devastating stock market crash in United States’ history. There were actually 3 separate crashes, Black Thursday (10/24/29), Black Monday (10/28/29) and Black Tuesday (10/29/29) that triggered a month-long decline in the NYSE. Prior to Black Thursday, the market was increasingly unstable, erratically swinging up and down. While most people believe the Great Depression began after the stock market crashed, it actually began in other countries a year earlier, in 1928. In addition, the United States’ market began to recover in early 1930, only to have a severe drought damage much of the crops in the midwest that summer of 1930.

My father was born in November 1930. As a child of the Great Depression, his formative years were defined by these circumstances. My grandparents, whom I didn’t get the chance to meet (they passed away before I was born) lost their home to foreclosure. My grandfather had left his job in Detroit to take a management position with an out-of-state factory, only to arrive and find that his job was gone and the factory had closed down. When my grandparents, dad and his two sisters returned to Detroit, the Great Depression was a grave reality.

Talking to my dad a few weeks ago, we discussed those times and how his family managed to survive. Though times were tough with unemployment rates over 25%, Dad remembered that his parents never stood in any food lines, even though my grandfather was out of work for several years. They certainly didn’t live lavishly, but somehow were able to make ends meet. In fact, Dad recently asked his older sister, my Aunt Giny, about those times. He asked her, “How did we survive? Father was not working, but he never stood in any food lines. How did they always put food on the table?” Aunt Giny apparently wandered into the basement one day during the 1930’s and stumbled upon a sizable amount of liquor. When she asked, my grandfather shooed her away and told her never to speak of it again. Could my family, strict Presbyterians, have survived the Depression by selling alcohol during Prohibition??? I guess we’ll never know for sure.

My Grandparents, at their home in 1950

One thing I do know is that the generation that lived through and grew up during the Depression was changed forever from it. For many years Dad never used a credit card. Neither did his parents. If they didn’t have cash, they didn’t buy it. When you live through something like that, I don’t think you forget about it. It changes the way you live your life and the way you spend money.

I believe our current market woes will change many, many people. I’ve seen so many bank-owned homes in the last 3 years in the Sacramento region. These REOs are often fantastic deals for the savvy buyer, but each listing was once a home to somebody, an American dream that turned into the American nightmare.

So many people made unwise financial decisions over the last decade. I hope that this changes us as a nation, that we collectively learn from our mistakes. From lenders who made bad loans to the homeowners who bought homes when they really weren’t qualified to do so. The people who refinanced their homes to buy expensive automobiles, kitchen remodels, or swimming pools, and now have no equity in their homes.

I hope we take this information and, as a country, become savers instead of spenders, investors instead of just consumers. I hope more folks tear up the credit cards and choose to only buy what they can afford instead of insisting on keeping up with the Joneses.