Friends and tradesmen, not to mention clients, have all been asking me the same question in the past few weeks. Is this 1929? Are we headed for a depression?

Let's begin with the somewhat reassuring point that even if we are headed for a depression, it will not be like the memories or pictures in history books we have of the 1930s. In 1929, Americans had the per capita GDP of people now living in the Balkans. Today it is five times higher. So even if we have a depression, there won't be any Hoovervilles or soup lines. There may be a massive increase in demands for public assistance and rental housing, but this is hardship, not the privations of the 1930s.

We have learned from what happened back then and from Japan's experience in the 1990s. We will probably not make the same mistakes. We will, however, make other mistakes (and indeed we already have). Although conditions change, the basic human motivations of fear, greed, ignorance, and hubris are enduring.

Keep in mind as we go through these tough times that even the smartest people can be wrong. Isaac Newton lost money in the South Sea Bubble. He not only figured gravity out, but was Master of the Mint, as close to being a central bank governor as one could be back in the seventeenth century. Recognizing the developing bubble, he sold his position. Then, when prices continued to rise, he decided that he must have been mistaken and bought back in just before the top, ultimately losing a small fortune.

More than three centuries have passed, but the model is still the same. A great idea comes along that has some grounding in economic reality: exotic spices from afar; the beauty of tulips; canals as the hot new mode of transport; railroads making canals obsolete; a radio in every home or a car in every garage; the Internet and dot commerce; home prices that can only go up. Those who first pursue the idea make money. They tell their friends, and their friends pile in. More buyers mean higher prices for assets related to the core idea. Lenders, seeing a new idea whose price is rising, lower prudential standards as those investing in that idea have all made money and never defaulted on their loans. Higher asset values means improved balance sheets, a greater feeling of economic security, and so even more willingness by all parties to borrow and lend.

We all fell for it again. Who do you think we all are? Geniuses like Newton?

Most readers, I trust, have played the board game Monopoly. But probably few of us actually play by the original rules, which provide insight into hard times. One popular embellishment of the original version is to pool all the money collected from Chance, Community Chest, Income Tax, and Luxury Tax and pay it out to the person who lands on Free Parking. Some expand this further, adding one of every kind of bill (a total of $686) to the take of the lucky player who lands on the space that the original rules designed as a free space where nothing happens. Improvisations like this turn a game originally designed for adults in the hard times of the 1930s into a much faster "Inflation Era" Monopoly, a game in which even children can accumulate cash and have a good time. Indeed, the desire to use the game to teach children the rudiments of money and economics in a manner which is fun is one of the reasons most players end up changing the rules.