October 19, 2016

UNLEARNABLE LESSONS:

Everyone forgets the most important thing about the Black Monday stock market crash of 1987 (Elena Holodny , 10/19/16, Business Insider)

Twenty-nine years ago, the Dow Jones Industrial Average plunged a gut-wrenching 508 points, or 22.6%, down to 1,738.74 on what is now referred to as Black Monday.

It was by far the largest one-day percentage drop in US stock market history.

But as scary as that October day was, US economic growth was ultimately resilient, and gross-domestic-product growth never went negative. This is arguably the most important thing to remember about the whole ordeal.

That's particularly important because at the time, just as in 1991 and post-dotcom, people believed there had been a recession, but later numbers wiped it out.  But even more important was that the '97 crash was precipitated--as were the next three slowdowns--by the Fed mistakenly raising rates into the teeth of deflation. [2008 looks like it may even actually classify as a recession in the long run.]

Posted by at October 19, 2016 3:23 PM

  

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