DEPRESSION

In economics, a depression is a
sustained,
long-term downturn in
economic activity in one or more
economies. It is a more severe
downturn than an economic recession,
which is a slowdown in economic activity
over the course of a normal business
cycle.

The Great Depression (1929-33) was

the
deepest
and
longestlasting economic downturn in the history
of the Western industrialized world.
In the United States, the Great
Depression began soon after the stock
market crash of October 29 1929, which
sent Wall Street into a panic and wiped
out millions of investors.

Indicators of Great Depression

9000 banks fell.

Americans lost 30% of the share in a
single day.
International Trade depressed
Construction was virtually halted in many
countries.
Primary Sectors such as agriculture and
trade suffered the most.
Unemployment rates were high.

New Deal Program

The New Deal was a series of domestic programs enacted

in the United States between 1933 and 1938
They included both laws passed by Congress as well as
presidential executive orders during the first term (1933
1937) of President Franklin D. Roosevelt.
The programs were in response to the Great Depression,
and focused on what historians refer to as the "3 Rs,"
Relief, Recovery, and Reform
relief :for the unemployed and poor,
recovery :to bring the economy to normal levels,
reform :to protect the financial system to prevent
depression.

Top 10 programs of
NewDeal

Civilian Conservation Corps

Civil Works Administration
Federal Housing Administration
Federal Security Agency
Home Owner's Loan Corporation
National Recovery Act
Public Works Administration
Social Security Act
Tennessee Valley Authority
Works Progress Administration

Implication of depression in the

world economy
1. Risk Matters
The decline of 2008 taught us that once-in-alifetime events can occur. We've also learned
that diversification means more than just stocks
and bonds. The simultaneous decline of stocks,
bonds, housing and commodities is a stark
reminder that there are no "sure bets," and that
a cash cushion could save the day when times
get tough. Keeping one eye on risk and the
other on growth is a lesson worth remembering.

2. Experts Don't Know Everything

While the collapse of Long-Term Capital
Management in the late 1990s demonstrated
that genius does fail, the lesson was seen by
all but felt by few. The crash of 2008 was the
complete reverse. Few saw it coming, but
most felt it arrive. If we've learned anything
from the experience, it should be that blind
trust is a bad idea and that even experts can't
predict the market.

3. You Can't Live on Averages

Markets don't usually move in a straight
line. All of the projections are based on the
idea that investors should buy and hold,
but 2008 showed that that strategy doesn't
always work, particularly for investors who
are approaching retirement.

4. You Can't Delegate Your Future

Far too many investors operate on the "set it and forget
it" plan. They dutifully make their biweekly
contributions to their 401(k) plans and let the years
pass, hoping for magic by the time they retire. Anyone
on that plan who expected to retire anytime between
2008 and 2018 or so is likely in for a rude awakening.
Set it and forget it failed. Even target-date-funds, which
are supposed to automatically move assets to a more
conservative stance as retirement approaches, didn't
all do the job investors expected them to do. Moving,
forward, "pay attention" may be a better mantra.

Men are not prisoners of fate, but only

prisoners of their own minds.
Franklin D. Roosevelt