This is what the 1929–39 Great Depression was like
It’s always good to be prepared for any eventuality. Some are predicting that another Great Depression is heading our way. Would you be able to survive? I take a look at what the 1929–39 depression was like. It might help you plan for the coming crisis.
This might sound like another doom and gloom post, but I prefer to be over-prepared than under-prepared. I hope we don’t get another Great Depression, but if we do, I plan to be able to weather the storm.
What’s the alternative? To stick my head in the sand and hope it doesn’t happen? That might work, but it might also wipe me out. I refuse to take that risk.
The Stock Market
The Dow Jones Industrial Average peaked at 381.17 on 3 September 1929.
The crash started on Thursday 24 October with the Dow opening down 11% from the previous day’s close. It recovered much of those losses over the next two days.
On Monday 28 October, the Dow closed down 13%. The next day, it closed down an additional 12 %.
The bottom wasn’t reached until almost 3 years later on 8 July 1932. The low point was 41.22. That’s a drop of 89.2% from the peak.
The Dow didn’t reach its previous peak of 381.17 until 23 November 1954.
To put that another way, the Dow didn’t regain its previous peak for over 25 years.
How would you cope? If the Dow dropped almost 90% and didn’t recover for 25 years, would you be able to cope with that? It would destroy our wealth.
Elon Musk has a net worth of around $250 billion. If stocks crashed 90%, he’d only have $25 billion. Not too shabby, but still pretty devastating.
If you have $500,000 in your 401K, you might be left with $50K. How would that affect your retirement plans?
Maybe you don’t have your money invested in stocks so thin you’re safe from a stock market crash. Maybe you have your cash in the bank.
Between 1930 and 1933, around 9,000 banks in the US failed. 1933 was the worst year when around 4,000 failed.
Banks in every state were either closed or operating under restrictions by 4 March 1933.
During the financial crisis of 2008–13, 489 FDIC-insured banks failed.
There were an estimated 4,951 banks in the US as of 8 September 2021.
How would you cope? If you have cash in the bank, you may think it’s safe because it’s FDIC insured. But if multiple banks collapsed, the FED would need to create extra USD to compensate customers that lost money.
This could result in massive inflation. You’d get your money back, but that money could end up being near-worthless.
Unemployment rose from 3% to 24.9% between 1929 and 1933. That means that 1 out of every 4 people was out of work.
The unemployment rate stayed above 10% until 1941.
If that wasn’t bad enough, wages fell 42.5% during those years.
How would you cope? If you were sacked or had your wages cut by over 40%, what would your life be like? It would push many over the edge.
In 1932, 273,000 people in the US lost their homes.
In 1933, a thousand mortgages a day were being foreclosed.
By 1933, between 40% and 50% of home mortgages were in default.
Millions of people were left homeless during the Great Depression. Some managed to stay with relatives, while others squatted in empty properties.
How would you cope? What would you do if lost your home? Do you have friends or family that you could stay with? If you have, what if they also lose their homes?
Any one of the above scenarios would be pretty devastating. Imagine all 4 affecting you at the same time. It doesn’t bear thinking about, but think about it we must.
Even another Great Depression that was half of the above would push many over the edge.
How can you prepare?
It’s almost impossible to prepare for a situation as devastating as the Great Depression. The economic destruction was so bad that everyone was affected.
For me, owning property is one way to prepare yourself. If you own your own home and don’t have a mortgage on it, you are at least protected from homelessness. That’s assuming the US government doesn’t repossess your home because you can’t afford to pay the property taxes.
I don’t currently own my own home, but am planning to buy one soon. I’m between homes.
I currently have a small portion of my net worth in Bitcoin. In another Great Depression, I’m sure those prices would crash as well in dollar terms. However, it can’t be confiscated and can’t disappear in a banking crash like cash can. This is assuming you hold the Bitcoin yourself in a wallet and don’t hold it on an exchange.
If there was another Great Depression, many crypto exchanges would collapse alongside the banks. Remember not your keys, not your crypto.
A third way to protect me is to have a few side hustles. The income from those might drop during a recession or depression, but at least I’d still have some money coming in. I wouldn’t be at the mercy of an employer.
Other than the above ways to help protect me, I would diversify my investments as much as possible. Currently, I hold my cash in different currencies in different countries. Not every country will be affected the same way. That would enable me to be nimble enough to move quickly if I needed to.
Over the coming year or two, I’ll also likely invest in assets in different locations around the world. I love to travel, so this is ideal for me even in good times.
Will we have another Great Depression?
I think it’s more likely that we won’t. But I also think that economy over the next few years will be far worse than most people can imagine.
Helping you survive this crisis
There are things that we can do as individuals to survive the crisis. The following articles have advice on how to spend less and earn more.