The reality is that March 2009 was more like a once-in-a-generation moment to invest than it was a once-in-a-lifetime event. Other years besides 1974 and 2009, like 1982 and even 2002, also witnessed market bottoms. There are differences of course. In 1983 and 2009, it was virtually a straight-up vertical, whereas in 1974 and 2002 one had to wait nine years for an authentic bull market.
None of these bear markets were alike. McMillan recalls, there was a sense in the late 1990s that the dot.com bubble inevitably would burst. But between 2000 and 2002, unemployment rose modestly from 4 percent to 6 percent and most Americans outside of Silicon Valley continued about their lives with smaller portfolios but otherwise few changes. The September 11 terrorist attacks effected the national psyche to a greater degree.
In 2008, there was “a sense that everything was coming apart,” McMillan says. When the first TARP bill failed to pass Congress, there was pervasive despair that the problems were beyond the government’s ability to address.
“The government was physically flailing around because they had to do something,” McMillan says. “There was a sense they didn’t know what was going on.”
Ultimately, the public realized officials at the Federal Reserve Board and Treasury Department would be relentless in preventing the crisis from metastasizing. “It was similar to the 1930s. Once people sensed FDR was going to do something [throwing one program after another at the Depression], it didn’t matter,” McMillan says.
Glimmers of confidence began to reappear in March, 2009. Suspending mark-to-market accounting at the banks proved to be hugely helpful. As the dust settled, greed enjoyed a resurgence as investors realized how cheap equities were.
But the short-term lesson beyond investing revolved around an excessive reliance on government. People today assume “governments will do whatever it wants and whatever it takes,” McMillan says “We’ve now seen it in Europe and China.” The only thing that can prevent governments from rescuing the global economy is their own incompetence -- at least that’s how the subliminal message to the investing class is perceived.
That's a dangerous belief and not everyone shares it. Bailouts spawned a sense of outrage that sours our national conversations to this day. It gave way to the Tea Party on the right, and more recently, a rising Herbal Tea Party on the left.
Many people increasingly question the viability of fiat money (Bitcoin is just one concrete example), as well as the legality of the bailouts of financial firms that played central roles in creating the crisis. Among the financial establishment, JPMorgan just announced its own digital coin and others are likely to follow.
On the flip side, Modern Monetary Theory (MMT), which asserts it doesn’t matter how much money a central bank prints as long as it controls its own currency, is gaining popularity. MMT is widely seen as "garbage" by the Wall Street establishment but that same establishment no longer has the credibility it once did on Main Street.