The American culture has always been utterly and completely obsessed with the economy. It envelops us and constantly pushes itself to the forefront of our thoughts. Unfortunately, we can’t always be perfectly in tune with our economy. When we mess up, the economy falls to its knees and can, with little to no hesitation, die at any moment. What we are experiencing right now is the American economy on its knees and crumbling fast. While this isn’t as severe as the Great Depression of 1929, it has been devastating nonetheless. What we’ve seen thus far are some rather interesting parallels between the current economic crisis and that of the 20s. While some may attribute our current state of affairs to the mortgage fiasco, the fall of American automakers, or overconfidence, I believe it was a combination of all of these, paired with the perception of security by investors.
[...] By not taking his money out at the early signs of market trouble, he was able to average his losses through dollar-cost averaging. However, this also meant that he doesn't have as much capital as he could to invest at the low-point in the market, which he believes is right about now. He found this to be quite interesting. I thanked him and we ended the interview on that note.[6] As evidenced, there are far more parallels than anyone ever imagined between these two [...]
[...] When they are just starting out, they will display signs of wealth, such as sports cars, big houses, and of course, money, when in actuality they have none of these yet. Since these things attract rap's fan base, the video and music will sell, causing the rapper to launch a successful career. This will, in turn, bring him or her money, which will eventually lead to sports cars, big houses, and lots of cash. The self-fulfilling prophecy is clearly a very powerful bias, which is why I feel that it can very effectively be applied to these economic crises. [...]
[...] By first displaying what we were trying to accomplish or avoid then stating what happened, we could apply the self-fulfilling prophecy bias and see if it works. First we need to discuss how the economy was and how it came to get as bad as it got. By establishing a good timeline, we can truly see if the self-fulfilling prophecy bias works with each economic depression. Therefore, I think it would be appropriate to discuss the major points in each crisis and what factors most greatly affected them. [...]
[...] Even though these two market collapses were separated by more than six decades, [therein lies] a common reality that none but a very few astute, well-connected, or economically well-schooled were able to perceive: an artificial economic expansion created by the issuance of vast amounts of paper money.”[4] By pumping lots and lots of cash into the public, we simply created the illusion of economic stability and financial growth. Once again we see a self-fulfilling prophecy in action with the attempt to help the economy by stimulating consumer spending with more cash on hand. [...]
[...] Instead of using the money to bailout the railroads, the Big Three automakers got it (and wasted it). The majority of the money, however, went to bailing out some of the biggest banks, lending, and financial institutions such as AIG, Bank of America, Fannie May, and Freddie Mac.[5] By now it should be easy to see how this fits into a self-fulfilling prophecy. Many people felt like they were able to predict this depression, but come up with excuses for why they didn't say anything. This is the 20/20 hindsight bias in effect. [...]
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