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Agriculture.com Staff 01/27/2009 @ 11:32am

For the first time since the Great Depression, in the last 12 months we have witnessed lower stock prices, lower commodity prices, and lower real estate prices all at the same time.

The International Stock Market chart (below) shows how far the stock market has dropped from the major high in October of 2007. This represents one of the three largest drops in the stock market in the last 50 years.

In 1973-1974, the S&P 500 dropped by 48.2% in one year. From 2000 to the low in 2002, the S&P 500 dropped by 49.1%. From October 2007 to October 2008, the S&P dropped by 45.8%.

What caused this historic price collapse? It's a complicated answer with many different reasons. The economic problems actually developed over the last two decades. The following three main factors led to the meltdown.

For the first time since the Great Depression, in the last 12 months we have witnessed lower stock prices, lower commodity prices, and lower real estate prices all at the same time.

  1. The impact of global movement of money
    In the last 20 years, we have witnessed a huge increase in wealth and the amount of money that has been created. Fed Chairman Bernake referred to this as the global saving glut, as money -- especially money from Asia -- was put in banks and then sent around the world. While this was initially positive for the U.S. and the global economy, it eventually turned into a negative factor.
  2. The Commodity Research Bureau chart (above) shows how fast and how far commodity prices have dropped from the major highs posted in June of 2008 to the October harvest lows.

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