The National Bureau of Economic Research (NBER), a private nonprofit research organization which came into existence in 1920, has documented U.S. economic activity back to 1802. Through 2021, the NBER data show that the United States has experienced 48 recessions — or about one per five years.
While their definition is a bit more complicated, a recession is generally defined by two consecutive quarters of declining real gross domestic output. (NBER uses a more detailed definition, which looks for a decline in employment, industrial production, real personal income, real manufacturing, and trade sales.)
Touring Past Crises: What Happened and Why
When a major crisis hits — for example, the 2008 financial crisis, the 2020 COVID-19 pandemic, the 2001 terrorist attacks, and prolonged recession — unexpected things happen. And if you’re one of the millions of people adversely affected, stress and emotions can add to the financial quandaries and problems you face. Each crisis is unique and impacts the economy and individuals personally in differing ways.
Past experience and the “school of hard knocks” can certainly improve how well you react to each such event. But you can prepare for and better manage through especially challenging times by examining such past episodes.
Why pilot training has relevance for your tour …
What I’m suggesting is a similar type of training that commercial airline pilots go through on flight simulators. Consider that you wouldn’t want a pilot encountering an unusual event (for example, dual engine failure requiring a water landing) for the first time in a real flight with hundreds of passengers on board a jumbo jet! All those US Airways passengers onboard Captain Sullenberger’s jet were grateful that he and his copilot had extensive training and knew what possible options to quickly consider when their plane’s twin engines shut down after striking a flock of geese soon after takeoff from LaGuardia Airport in New York City.
This book aims to provide you with the training and historic perspective so that you are well prepared to deal with and navigate a wide range of personal financial challenges. When an unexpected crisis occurs, our biological wiring causes our fear reaction to kick in, which can cause more problems.
Keeping calm and keeping perspective are vital. Knowing how prior crises have unfolded and gotten resolved can help. Also, there are opportunities to benefit from lower prices on investments like stocks, real estate, and small business at such times, but many people aren’t financially or emotionally positioned to do so.
When a crisis unfolds, I don’t need to tell you that it’s “breaking news.” Nearly everyone consumes some news and media coverage, whether through traditional outlets (such as radio and television) or through newer platforms (such as social media, blogs, podcasts, and so forth). I can tell you from thousands of personal observations that the economic coverage and biases of those outlets can and will get in the way of you making the best personal financial decisions. And so too can your own biases and beliefs, especially if you follow politics and identify reasonably strongly with candidates from a particular political party or ideology.
The Panic of 1907
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