Ten years ago today Lehman Brothers filed for bankruptcy. The filing didn’t create the conditions that led to the near total collapse of our financial system and made what has become known as the Great Recession the greatest economic calamity since the Great Depression. But it was a monumental event. It transformed a recession into the Great Recession, eventually leading to stock markets losses of around 50 percent, innumerable business failures and business and personal bankruptcies, and massive unemployment (albeit nowhere near the levels of the Great Depression). And we’re still living with the fallout of the Great Recession to this day.
There is no doubt in my mind, Vera, that we were on the cusp of the Second Great Depression in 2008. But for the response of policy makers and regulators — most especially the Fed Chair and Treasury Secretary — the world easily could have slipped into another deep economic depression. All the bad economic consequences that befell us notwithstanding, we dodged the big bullet. This time.
I say this time because there will be other times to come. Economic cycles, including contractions, are unavoidable. Just ask history if you don’t believe me. Credit excesses inevitably build and build until the breaking point. Usually, those breaking points are run-of-the-mill recessions. But, occasionally, they’re bigger than that. Occasionally, they’re depressions.
Depressions and deep recessions are dangerous things. Bankruptcies multiply. Families fracture. Suicides rise. On a grander scale, they can lead to conflict and wars. Social strife. Revolutions. We know they’re bad, but we haven’t figured out a way to avoid them.
I don’t know if I’ll see another Great Recession or a depression in my lifetime. Maybe I will, maybe I won’t. But it’s almost certain you’ll see one. Maybe more than one.
These events can wipe people out financially, which is something to keep in mind. It’s easy to live life by extrapolating the present, assuming today’s conditions will last forever. But they never do. Sometimes things take a turn for the better. Sometimes hard times catch us unawares.
It’s good to be aware. You can eliminate or reduce many risks by simply paying attention. And not being caught unawares.
It’s also good to be well positioned to weather the economic storms that most assuredly will buffet the country from time to time. Just like some people who live on the Outer Banks are always prepared for the big storm. They don’t know when it will come. But they know it will come. And they’ll be as prepared as they can be.
The good thing about storms is they don’t last forever. They pass. And then the skies clear and people rebuild and get on with their lives. Most people. But not everyone. Storms claim victims. Perhaps some are inevitable. But many are avoidable.
We can’t avoid storms. But we can be aware. And realize they’re coming. Someday. Unannounced. Yet not necessarily a surprise.
It’s how we weather them that counts.