American history from 1877: How the Great Depression compare to The Current Economic Recession affecting the US
American history from 1877: How the Great Depression compare to The Current Economic Recession affecting the US.
In 1929s, a global depression hit countries with market economies. Despite the fact that the Great Depression was moderately gentle in some nations, it had very severe effects on others, especially the America. In the United States, the great depression went down in history as one of the worst economic crisis, which left a deep-seated situation, leading to joblessness, starvation and homelessness for over a decade in the US. The Great Depression in ...view middle of the document...
By April 2009, the rate of unemployment in the United States was about 8.5 percent, with more than five states in the country reporting levels greater than 10 percent(Helbling, 2015).. If the proportion of the population who gave up looking for a job or go for the part-time job are part of the United States unemployment, measurements, the actual levels rose to 15 percent.
Because of fewer regulations on purchases on stock market, in the periods leading to the Great Depression, people were able to purchase stocks on margin, where the only requirements were to place a down of 10 percent (Claessens, Kose & Terrones, n.d.). This meant that investors could purchase stocks valued at a hundred dollars for ten dollars, if that stock increased by as little as 10 percent, they would have gotten twice the value. Such form of speculation resulted to a broad speculation, with investors cashing in their life savings to invest cash in the stock market; this resulted to artificially increased prices (Helbling, 2015). Stock market controls were resettled during the Great Depression to avoid a similar situation from affecting the financial market in future, but some decades later, the United States witnessed a similar situation that is still being seen today, especially in the housing market. For example, people have bought highly priced homes, forcing them to rely entirely on loans of up to 100 or even more than a 100 percent.
Banking system-Banks in the United States collapsed during the Great Depression since Americans lost confidence in the system and decided to withdraw their entire bank deposits, within a short period, especially after the collapse if the stock market in 1929. Today, the banking system is getting it almost wrong, with their economically unhealthy lending activities, especially when almost all credits are directed towards the housing sector due to the perceived market boom (Helbling, 2015). This perceived market boom is very similar to the stock market situation experienced about seven decades ago.
Loss of confidence- The Great Depression showed that any sign of a financial crisis leads to panic among American consumers which in turn leads to less spending. Today, people are reluctant to spend on some assets due to fear of roaming economic depression (Eichengreen & Temin, 2000). Clearly, the United States is following the same path followed in the 1929 and a part of 1930s.
However, differences are seen regarding government intervention during the current financial crisis and the Great Depression. Franklin Roosevelt conducted immediate response when he rose into power in 1933 while his predecessor, Hobert Hoover had mainly assumed or ignored the sources and impacts of the Great Depression (Field, 2009). President Franklin created several policies to eliminate financial problems from repeating and...