Trading Through the 2008 Crash From the Perspective of a Financial Historian

The 2008 financial crisis will have a place in the history books and be talked about for centuries. If you invested through it, congratulations.

We all remember what it felt like to see the Dow Jones (DJINDICES: ^DJI  ) fall 50%. I sure do, anyway.

But what was it like from the perspective of a financial historian? I asked David Cowen, CEO of the Museum of American Finance. Here's what he had to say (transcript follows):

Morgan Housel: During 2008, did you respond with less of a shock than others? Do you think knowing that this has happened before -- we've had crash after crash after crash -- whereas to Main Street, it sort of felt like this is a one-in-a-century event?

David Cowen: You know, that's interesting because you're asking me personally, and I was actually trading at that time and had to live through that moment, and so I wasn't thinking with my financial historian's hat, but when you're in the moment, just trying to survive and do the right things in that context. So no, I didn't have my financial historian's hat on the way I do at other times. But then once you get through that moment, you start to contextualize it. You know that in 1792, at the beginnings of our nation, we had a financial panic; 1819 we had a panic -- 1837, 1857, 1870, 1873, 1890s, et cetera, et cetera. 1907, another famous panic. 1929, as I keep going on and on. So yeah, when you step back from it, but on those days and those moments you're in the fight.

But what I would say is when there's a central regulating monetary authority like the Federal Reserve -- and in our periods of history, the first bank in the United States, 1791 to 1811; second bank in the United States, 1816 to '36 -- that it's much more mitigated. There are much less of these type of panics when there is a central regulating monetary authority to check the activity to the best extent they can and then be lender of last resort to assist in times of need.

Morgan Housel: If we have fewer crises within the central-bank model, are they deeper and more severe when they happen? There have been people who have made that argument.

David Cowen: I don't necessarily think so, because let's take a look at the 1987 crash. We quickly rebound from that, right? The Fed, Greenspan injects a lot of liquidity so there are times they can stem what might have been exasperating or exasperating circumstances. So no, I don't think so, though we're in a very difficult one right now. Ben Bernanke's a great student of the Depression, but most economists, I think, would say if they didn't take the actions they did in 2008, we would have had a much more severe downturn than we actually did.


Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2383491, ~/Articles/ArticleHandler.aspx, 9/30/2016 3:06:18 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 5 hours ago Sponsored by:
DOW 18,143.45 -195.79 -1.07%
S&P 500 2,151.13 -20.24 -0.93%
NASD 5,269.15 -49.39 -0.93%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/29/2016 4:35 PM
^DJI $18143.45 Down -195.79 -1.07%