The Story of Rich: A Financial Fable of Wealth and Reason During Uncertain Times

The Ongoing Crisis Mentality

And this brings us to what appears to be the most important issue facing investors and financial advisors these days. Was the Great Recession – or Panic of 2008 – a watershed event that changed the future forever? Did it create a more dangerous economy? Did it prove that everything is a random walk? Does it mean planning has no value and advice no worth?

I don’t think so. Economics is the study of human action. It is the study of how markets work and how people respond to incentives. It is the study of how wealth is created . . . not bank account wealth . . . but living standards, economic assets and productive efficiency. Do you ever stop and become amazed at how living standards have improved in the past 100, 200 or 1000 years? The average person these days lives better than the Royalty of centuries before.

This is because human beings are relentless in their pursuit of a better life. No matter how bearish people are, no matter how many politically-minded people try to tell you the world is in a “new normal” or that it has entered a more dangerous part of history, this did not change in 2008. The world has been through crises like the recent one many times before.

In the early 1980s, U.S. unemployment was 10.8 percent, inflation and interest rates soared, the savings and loan industry collapsed, every Latin and South American country (except for Colombia and Chile) defaulted on its debt, and pessimism was rampant. In 1989, Japan, then the second largest ...