Are there parallels between the Great Depression and economic downturn today?

Answer 1

It's hard to know whether you mean to ask about the world economy, the American economy, or perhaps the economy of some other nation. I'm going to guess that you refer to the American economy, and focus my answer upon that.

Although it would be foolish to deny the possibility that the economy to-day could go into a major down-turn, it's really very different from what it was just before or during the Great Depression.

Although the American economy was relatively industrialized, the relative share of the services and manufacturing sectors is much larger than it was in 1929 and the next decade. We are even further away, in other words, from a condition where people could just go back to the farm until things got better.

The relative size of the government is vastly larger than it was in 1929. That will be difficult or impossible to afford if the economy goes into a real depression.

By many measures, inequalities of wealth and of income were very pronounced just before the Great Depression, and they are very pronounced now. However, there's never been much more that hand-waving and incoherence in claims that this inequality can be a contributing factor to economic decline.

The mainstream of economic thought has come to accept that bad policy on the part of the Federal Reserve System was a proximate cause of the Great Depression -- the Fed inflated the money supply, which distorted patterns of investment, and then allowed it to collapse, which cause different distortions, instead of just acting to keep over-all prices stable. Now-a-days, the Fed seems to be alert to the dangers of letting the money supply collapse, though many believe that Fed policy helped to feed recent bad patterns of investment (especially in real estate).

Another trigger of the Great Depression was protectionism -- the Republicans tried to make Americans wealthier by forcing up the price of foreign-made goods, and foreign nations retaliated taxing or prohibitting American-made goods. There is a lot of protectionist talk again these days, but Congress probably won't be as stupid as they were before.

The economy was more clearly in trouble in the late '70s than it is now. So why are people looking back 80 years instead of 30? There are several reasons, but here are two: [1] A lot of people have no memory of the '70s; many of to-day's adults weren't even born then. [2] The mainstream media is trying to "sell papers" and to affect the up-coming election by playing-up fears of economic crisis.

Answer 2

Somewhat. Unemployment back then was 25% for white, 50% for minorities. Now unemployment is only at 8%, Ten at most. Luckily the government is reacting faster today because of what we learned in the 1930s

Answer 3

I think that both the great depression and todays economical recession cannot be pinned upon one person, business, or the government... it was a combination of all three not doing their part in the correct manner. The common person, to start of with, was frivolous with money that they didn't have to spend. The real estate market is a perfect example, people buying houses they can't afford. I saw on the news on TV. That a woman making $30,000 a year bought a $400,000 home. I'm sorry, but what was the thought process when buying a home that is about 13 times your annual salary, and I believe that the 3o thousand dollars was gross, not net. I mean schools should teach a class that's something like "Fiscal Responsibility 101", just so we can sleep comfortably knowing that our children won't pull garbage like paying everything with credit, not paying the bills, losing all their credit so their score is like a 200, and then having the banks approve loans to said kids who can't make the payments, and in the end the government will foreclose their homes, but then when they cry about it because nobody ever taught them better, we can give then the homes. Mind you I'm only a child myself and I have much to learn about the American economic system and money, but I have the sense to not buy things that I can't afford. The way that everyone's getting free houses, I might as well buy a house well out of my price range and then when I can't make the payments I'll bitch and moan and they can just give it to me. I mean that's what's fair nowadays right, the people who can't make their payments get a free house and those who happen to never miss a payment get the exact same thing, a house, but minus a boatload of money because they actually make the payments. The same situation was occurring in the 20's, The model-T, refrigerators, washing machines, all these appliances which were previously unavailable to the general public were now within reach. But the thing is, people did the same thing, they over bought, and in turn the companies over produced, So what happens when everybody cant pay for these appliances and stop buying, well the companies are left with a surplus of washing machines, the companies stock starts to plummet from loss of sales and then all the people who put their money into the Stock Market because they saw everybody else getting money form the rapid stock rise in the late 20', lose all that money that the company is no longer making. Now, take that money that the people invested in the stock market, and make it loans from banks. That right, now the banks aren't getting their money back and now the government gets involved with bailout plans. Those are never a fun time. If there is one thing that I am so incredibly pissed at it's corporations, or big business. And yes, I mean Merrill Lynch, AIG, and all the other scum of the earth who only think of power and money and not how they can help others.. I can't stand that these companies in the first place, approved loans that never, ever should have gone though, just to make a buck and screw the American person (mind you the person isn't innocent either), and then when they have run out of money, the government goes and hands out 200 billion dollars in bail out money like its free pancake day at IHOP. Then, to really screw over the taxpayers and everybody who helped the company out of the slump, they go and give 140 million dollar bonuses like it comes out of the water cooler. Excuse me... but what the heck? The middle class person pays taxes so that The government can help out Merrill lynch pay John Thain, the chairman of Merrill Lynch, a ten million dollar bonus for the year when in October of that same year, the company received 10 billion dollars in taxpayers money from the Troubled Asset Relief Fund (TARF) that same October. Now correct me if I'm wrong but that money is given to help support a company in need of assistance and pay worker pensions, things of that sort, not give multi-million dollar bonuses to people, whom to be honest, and really don't need it. If anything, when a corporation is in a deep hole just as Merrill Lynch was, the first thing cut should be executive bonuses, because you know, they don't make enough money in annual salary. Now you'd think after the great depression that government and business would've realized that overproduction and undeserved loans would be a thing of the past. I understand how people could mess up credit back in the 1920's, installed payments first came out, nobody knew what it was. But more than eighty years later there is no excuse for not know the outcome of missed payments of mortgages, car payments, and credit card payments, it is taught in school, and there is no excuse for acting in a frivolous manner the way they did in the 1920's. What the new generation doesn't realize is that after high school, daddy isn't there anymore to pay your credit card bills, to buy you a car when you total you old Mercedes, or to pay for a new Gucci pocketbook. Kids can't do their own laundry, cook, clean, study or anything by the time they get to college. They don't understand the type of living where you have to make your own money and pay your own bills. At this rate economic ignorance, I can predict a pattern of recession or possibly even depression at the worst, every 80 to 100 hundred years if the American child doesn't learn the meaning of a hard earned dollar and how to be responsible when spending it.

Answer 4

The Great Depression not only represents an example of the historically proved importance of an under-regulated market but it also is the source of legislation that is responsible for the US social programs, banking system and regulatory facility.

Answer 5

obviously not Economy EXTREMELY bad during the Great Depression We might be in a bad economy, but this will not become the next Great Deppression

Answer 6

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