As financial markets continue to experience extreme volatility,
many commentators are making new comparisons between the equity
markets of today and those of the Great Depression. With those
comparisons come predictions that equity markets will experience
a crash in which they will lose as much as 90% of their current
value. Based upon these predictions, readers are encouraged to
exit equity markets and, instead, hold their capital in cash or
sovereign debt instruments, which were safe havens during the
Depression. While anything is possible, such comparisons and
predictions don’t comport with differences between today’s
economy and the economy of the Depression era. At the time of
the Great Depression, governments of the world weren’t burdened
with the vast debt that burdens them today. Therefore, during
the Depression, cash and sovereign debt were true safe havens.
Cash and bonds were made even more attractive by the Federal
Reserve, which reduced the supply of money in the economy by
25%. This resulted in