TL;DR
History doesn’t repeat, but it rhymes. The current trade war, echoing Smoot-Hawley, threatens to trigger a market crash, leaving millions like John, a retiree, financially devastated, repeating the mistakes of the past.
Story
John, a retiree, saw his life savings evaporate almost overnight. Sound familiar? It’s a tale as old as markets themselves, echoing from 1929 to 2008, and now, rhyming again. The current market turmoil, fueled by trade wars reminiscent of the Smoot-Hawley disaster, threatens to wipe out decades of gains.
How? Let’s break it down. Tariffs, essentially taxes on imported goods, trigger a domino effect. ‣ Tariffs: Taxes on imported goods, often used to protect domestic industries.
They increase prices, stifle trade, and spark retaliatory tariffs from other countries. It becomes a global game of chicken, where everyone loses. Businesses suffer, layoffs surge, and consumer spending plummets—a recipe for economic disaster. It’s like setting fire to your house to keep warm.
Remember the 2008 housing crisis? Overvalued assets, reckless lending—a house of cards waiting to collapse. Today’s market feels eerily similar. Fueled by easy money and speculative frenzy, tech giants dominate. But their global reach now becomes their Achilles’ heel as trade wars bite.
This isn’t just a “dip.” It’s a potential systemic meltdown. Think 1929. The Dow lost 90%, taking 25 years to recover. Today, despite our “modern” tools, the fundamentals are fragile. Quantitative easing, once a magic bullet, has become a crutch. Are we just delaying the inevitable?
The human cost? Millions like John face financial ruin. Retirement dreams shattered, futures uncertain. The social fabric frays, with rising unemployment fueling unrest and even violence. It’s a grim picture, but history tells us it’s not fiction.
Sure, some argue “this time is different.” But that’s what they always say before the crash. Are we really that much smarter, or just more leveraged?
Advice
Diversify. Hold cash. Question everything. The market’s a casino, and the house always wins—eventually.
Source
https://www.reddit.com/r/investing/comments/1jqyy5b/us_equities_lost_90and_took_25_years_to_recover/