As the new year begins, financial markets continue to be gripped by uncertainty over developments in the Eurozone crisis. While not seeking to downplay the anxiety generated by these events, particularly in relation to their effects on investment portfolios, it’s worth reflecting critically on the 20th century, and putting current events in perspective:
- Nearly 100 years ago, Europe was engulfed by World War I. The economic effects were significant, with widespread rationing, labor shortages, and massive government borrowing.
- A little over a decade later, the Great Depression cut a swath through the global
economy. In the meantime, resentment was growing in Germany over its Great War reparations to the Allied powers. Berlin resorted to printing money to pay its
debts, which in turn led to hyperinflation. - More than 50 million died in the Second World War. In economic terms, the war’s impact was profound. Most of Europe’s infrastructure was destroyed, millions of people were left homeless, labor shortages were rife, and rationing was prevalent.
- In the mid-1970s, the depreciation of the US dollar, the breakdown of the monetary system, and war in the Middle East encouraged major oil producers to quadruple oil prices. Stock markets collapsed and stagflation—a combination of rising inflation alongside rising unemployment—gripped many countries.
- In the past decade, there have been the tragedies of 9/11; the 2004 Asian tsunami; the 2011 Japanese earthquake, tsunami, and nuclear crisis; and now, the financial crisis sparked by irresponsible lending, complex derivatives, and
excessive leverage.
Today, while the US and Europe are gripped by tough economic times, much of the developing world is thriving. Rising levels of education, health, and workforce participation also mean that the foundations are being built for a healthier and peaceful global economy.
Anxiety over recent market developments is completely understandable, and it is quite human to feel concerned about events in Europe. But amid all the bad news, it is also clear that the world is changing in positive ways that provide plenty of cause for hope and, at the very least, gratitude for what we already have.
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