I was watching a documentary recently on the “Dust Bowl”, which was really a term for situation back in the Great Depression of the 1930’s. Many farmers in the Great Plains of the U.S. ended up dealing with incredible financial hardship and in many cases, financial ruin. Additionally, an ecological disaster took place which impacted the landscape of that part of the country.
Now, I really don’t watch much TV these days. But this show drew me in for some reason, and got me thinking about what we could learn from this. I actually googled a few sites just to learn a little bit more about that period of time! There are some lessons we can take away from the dust bowl era, that can apply to us today in terms of our money.
Summary of the Dust Bowl
First of all, here is a quick summary (from a non-historian) of what happened during the Dust Bowl era. Basically, back in the early 1900’s, people moved to these areas of the western great plains – often as a part of homesteading. Whether Americans moving westward, or immigrants seeking a chance for a better life, people took on large amounts of acreage and began to farm the land.
A big issue here was the usefulness of the actual land. This land had been prairie, not previously used for farming the types of crops that would later be planted there. This was considered dry land, with prairie grass and not a ton of moisture.
However, land promoters apparently tried to market the land as being ripe for farming, and weather that was atypical in terms of having more rain than usual for the area ended up changing perceptions. It seems as though people almost wanted to believe that the climate had changed, and that they could farm the area through the help of more advanced farming techniques and equipment. Enticed by the prospect of harvesting crops that commanded a high price on the market, people took to taking this raw prairie land and turning into what they thought would be profitable farmland.
Unfortunately, the land wasn’t entirely suitable for this farming to the extent that they thought, as a period of dry weather severely impacted the ability to successfully grow these crops. Prior success turned to failure. Topsoil blew across the land and created incredible dust storms that engulfed communities. It’s remarkable how massive and ominous some of these storms seemed to be, and you can search for dust bowl pictures to see this.
At the same time the weather was not cooperating, and dust storms were brewing, the U.S. economy had become a disaster of its own. The Great Depression was wreaking havoc with the lives of many Americans, and prices for commodities plummeted.
Thus, farmers now had much weaker harvests (less to sell), and weaker markets to sell into (less per unit revenue). Naturally, when you have less to sell and at less per unit prices, it means economic disaster. People lost everything in many cases.
Dust Bowl Money Lessons
There are a number of financial lessons we can learn from the Dust Bowl era. Here are 4 that I came up with:
Don’t Ignore Historical Patterns
It seems as though people didn’t want to believe that this particular area of the country was really quite arid. Maybe not a desert like some parts of the Southwest, but more dry than needed for what they were hoping to accomplish.
They might have looked at a period of time where there was more rain than had usually fallen in years or decades previously, and come up with the conclusion that the climate had changed. Also, there was some mistaken notion that by farming the land it would impact the climate, which seems hard to imagine. But the former – ignoring historical patterns – proved costly. Some years may have seen a decent amount of precipitation, but others saw less. Those drier years proved to be very difficult for farmers.
For the rest of us in modern times, let’s pay attention to historical patterns. Just because the stock market is hot for a year or two doesn’t mean that we are headed toward long-term spectacular returns. Just because real estate surges in value for a period of time doesn’t mean a seller’s market will go on forever or never correct itself.
Be Careful of People Selling the Dream
It seems like many of us simply believe what we want to believe. Often times, we support our hopes with facts that tend to fit what we want to see, thus resulting in skewed beliefs on certain things. This seems to have been the case with some of the people who took on land in the Dust Bowl area and tried to make their fortunes on it. They bought the pitch – hook, line, and sinker.
This can be the case with investors, who think that great returns are easy to obtain. If a few others do it, why can’t I? I’ve seen this with some bloggers too, who see a few people making big money and think that they’re just a break or two away from easy, passive income. Then spend good money and a ton of time pursuing the dream. It might happen, but it might not either. Just be careful not to give in to the notion of easy money!
Don’t Put All of Your Eggs in One Basket
The land in the Dust Bowl area wasn’t exactly farmed for centuries. It was grassland. Nevertheless, people tried to make money farming wheat. Sure, that seemed great when wheat prices were high! But when crop production plummeted due to natural weather cycles, and the actual market for wheat cratered as well, many farmers faced serious financial issues. As in, losing just about everything. Many people were practically broke, and packed up and moved across the country to start over as a result.
There are people that get tempted to put everything into stocks. Or, everything into their job. Maybe they put money into their home, thinking (mistakenly) that it’s guaranteed to be the best investment they have. Sometimes people count on inheritances. The bottom line is that when that one thing you’re counting on doesn’t come to fruition, big problems can ensue. There is something to be said for the power of diversification!
We Have Fewer Material Needs Than We Think
Many of those people in the Dust Bowl era lived on land that ended up being harsh, and in living conditions that turned out to be tough. On top of that, they had very little money.
Yet, people made it through the situation. Now, medical care wasn’t the same back then, so that was a problem. But people didn’t need to buy expensive cars, drink lattes daily, or buy pricey shoes. They were able to get by with very little, as money was incredibly tight.
This is not to say that we want to live like we’re in the Dust Bowl! 🙂 However, when we think that things can never get bad and the good times will last forever, we’re putting ourselves at risk. Best to balance wants and needs, and at least think twice about what we buy. Do we need that $30,000 vehicle, or can we get by with a $20,000 instead? That $10,000 could come in handy someday, and could grow to a lot more through investing.
Key Takeaway – I think we can learn a lot from history. We should because there are many things that end up repeating themselves in one way or another. Might as well learn from it and turn the knowledge into something positive!
My Questions for You
Do you think there is a lot that we can learn from historical events?
What do you think about the lessons learned above?
Have you ever heard of the Dust Bowl, in terms of how it came about and it’s financial impact?