By s.i. wells
Life expectancy in the United States averages about 78 years. If we take an historical snapshot of the US economy through the lens of the Dow Jones Industrial Average, it is readily apparent that 20th century prosperity was born in the darkest days of 1932. Today, that run of good fortune is in its 78th year.
At its low in 1932, the Dow stood at 41. During the next 78 years, the US economy grew and the Dow reached over 14,100 in early 2008. Despite booms and busts during those years, the Dow’s spectacular ascent most eloquently recites the tale of our 20th century prosperity.
But in late 2008, the economy was hit by a massive “debt bubble” coronary and was only saved from total systemic collapse by extraordinary government interventions that managed to keep the economy on life support vs. falling into a new Depression.
One cannot help but wonder, considering the fragility of the economic recovery after such a catastrophic heart attack, whether the next crisis will precipitate a breathtaking financial spiral bringing this seven-decade cycle of bountifulness to a close. While no one should expect the US economy to flatline, residing in a nursing home for a generation or two appears highly likely. In fact, it seems almost self-evident that the economic sins of the fathers and grandfathers will be a yoke around their children's and grandchildren's collective necks until the debt-driven excesses of this era are only a distant memory.
In the end, life cycles are part of human existence. Although we try, we are powerless to abolish them. Learn from our financial mistakes we might, but sweep the economic misjudgments of the last decade under the rug without consequence, we cannot. In time, however, the ruinous bust that follows this seventy-eight year boom will give way to the promise and ingenuity of a new generation of entrepreneurs as the spirit of America and the Dow rises once again to lead the world back to prosperity.