By Eve Kaplan
NEW YORK (AdviceIQ) -- TV drama Downton Abbey has moved into the 1920s. We all know what is coming: the 1929 stock market crash and the Great Depression. Today, does an impending economic calamity await, ready to trash our assets?
We survived the 2008 financial crisis, with the economy inching up and stock market recovering (the winter downturn notwithstanding). The Standard & Poor's 500 is above the pre-crash peak. So maybe we don't have anything left to worry about. Unfortunately, catastrophes have a habit of sneaking up on us.
Economics and their unpleasant surprises animate the PBS series, set on an estate of wealthy English aristocrats. We are now in the fourth season. Even though Downton Abbey appears to be a relic from a bygone era, it has much to teach us today: Be careful with your finances.
Season 1 began with the sinking of the Titanic (1912) and the introduction of electricity to Downton Abbey. Servants ironed the morning newspaper and the status quo ruled. By Season 4, World War I has come and gone, leaving emotional scars. Now that we're in the Roaring Twenties, social mores and class barriers continue to weaken (relatively) and there is talk of installing a refrigerator in the kitchen. Upstairs and downstairs dramas play out against the backdrop of sequined flapper girls dresses and sexual emancipation.
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Money issues drive much of the plot. Downton Abbey faces a crippling inheritance tax after the death of Matthew Crawley, a middle-class lawyer who, to everyone's surprise, inherits a chunk of the family estate. Matthew fought to make it more economically viable. Mary Crawley, his widow, hints at taking out bank loans to prevent the estate's breakup. She's at loggerheads with Lord Grantham, head of the family, when it comes to running the estate, just as her deceased husband was.
Meanwhile, the decade has shaken up England economically. Things are booming in the industrial world, stocks are soaring and ownership is not confined to the wealthy anymore. But looking at what is looming over the world and the Crawley clan, it's a good bet their efforts to survive financially will be major plot points in future episodes.
By 1929, U.S. brokers lend small investors more than two-thirds of the value of the stocks they're buying -- a veritable house of cards. Wall Street is up 10-fold in a scant nine years. A warning comes when the London Stock Market crashes Sept. 20, 1929 -- a full month before the Wall Street crash. The trigger is the arrest of a top British investor on fraud and forgery charges. This rattles American investors, and Wall Street becomes acutely unsettled and implodes a month later. On Oct. 24, 1929 (Black Thursday), the U.S. market loses 11% at the opening bell on very high volume.
After the crash, England suffers similar economic symptoms as the U.S. Unemployment soars and Britain elects to go off the gold standard in 1931. The pound sterling promptly falls sharply, which helps the English economy, but European banks overall are mired in crisis in 1931. Economies around the world catch variations of the same cold. The Roaring Twenties definitely are over.
How exactly will the 1929 Crash affect Downton Abbey? It's plausible Cora Crawley's wealthy American mother and brother will suffer from Black Thursday's fallout. Dark clouds loom on the horizon as we hear her brother lost money on an ill-conceived business venture. Perhaps they even will reverse tables and ask the Crawleys for money.
Downton Abbey will become leaner in terms of support staff; remaining staff will cling to the estate since jobs are scarce. Plans to shore up Downton Abbey through bank loans will fail if banks close after the crash. Economic uncertainty will intrude further upon the aristocratic lifestyle the Crawleys enjoy and conspire against their struggle to keep Downton Abbey intact. Edith, a daughter of Lord Grantham, watched her fiance go to Germany to become a citizen. Will he succumb to populist German anti-Semitic hysteria and territorial expansion? Anything is possible.
Julian Fellowes, the creator of Downton Abbey, said he loves the period he set it in because it is a time of great social change. Perhaps we'll be spared the direct effects of World War II on Downton Abbey, but we certainly won't escape the corrosive effects of the impending 1929 Crash and its aftermath.
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-- Eve Kaplan, CFP, is a fee-only adviser in Berkeley Heights, N.J., at Kaplan Financial Advisors, a Registered Investment Adviser in New Jersey and New York.
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