1. Both were preceded by an extensive period of credit-fueled bubbles. Before there was the Great Depression there was the Roaring '20s; likewise, before Depression 2.0 were the Greenspan NASDAQ and housing bubbles. Consistent with Austrian business cycle theory, the end result of a credit-fueled bubble will be a corrective recession that purges out the malinvestments resulting from an excessive expansion of the money supply.
2. Both were marked by government interventionist policies designed to prevent falling asset prices. For instance, bans on short selling occurred in 2008 and at the beginning of the Great Depression. Likewise, stimulus packages were the prescribed remedy at the onset of the Great Depression, and are in vogue once again now. It's worth noting they were unsuccessful back then, and don't appear to be succeeding now.
Differences
1. There is a lack of a gold standard, which serves as a restriction to how much the money supply can be expanded. The dollar was devalued relative to gold during the Great Depression, so there were attempts to circumvent restrictions on the money supply, but ultimately the gold standard was not fully abolished until 1971, and so the Federal Reserve was a bit more restricted in how much money it could create. This restriction does not exist today.
2. America was not as debt-ridden during the Great Depression as it is today. Credit cards are a rather new creation, and the national debt and deficit spending were significantly lower.
3. America's debt is owned largely by foreigners. This introduces the possibility of economic warfare; foreign debt owners can devalue the dollar by selling Treasury bonds as well dollar reserves.
4. All major currencies are fiat currencies, and the US dollar is the world's reserve currency. This helps the United States in a way, as central banks have been inflating their money supply along with the US dollar to maintain parity of sorts. In this way, the US gets to export its inflation.
Both depressions were based speculation and affected the American Economy
Both depressions rapidly spread.
In both, people borrowed and and invested against their loaned amount. And then lost both their asset and they owed future earnings off of that.
In contrast the "worst" depression is affecting global economies due to the fact that we are a global society. Compared to the "great depression" war was how the global society was affected.
Contrasting further citizens of the US were the investors American and were only indebted to ourselves. Where as currently US debt is owed to foreign countries
Currency during the Great depression was backed by the gold standard where as today money is printed by the treasury and controlled by the Federal Government.
It is called the worst depression because it is greater than the first.
I am not overly knowledgeable about the causes of the current crisis and am not familiar with the concept that the current economic situation is being called the "worst depression"; however, the main thing that stuck out to me in the video that compares to our current economic situation was the mentioning of high employment rates. This is a constant topic of discussion today, especially in the presidential campaigns. I actually just read an article yesterday that 1 out of 2 college graduates from the class of 2012 will be or are unemployed or jobless.
During the Great Depression, the video made it seem like the financial situation changed very quickly and dramatically, where as today, I feel like it has been a gradual decline over the past decade.
Sarah and Andrew "Compare/Contrast" Compare -Bailouts. -Job Loss. -High unemployment. -Inflation. -Protests from the public. -Budget cuts. -Homelessness. -Economic declines: more significant in great depression. -Increase in money supply. Contrast -Great depression printed more money than they had gold to back up the value of. -Great depression reformed banking system from what it was. -Great depression government put in more security measures in banking and borrowing. -Great recession banking remained the same. -Great recession gold backed value of dollar but currently in debt from borrowing from other countries.
There are several similarities between the Great Depression and the Great Recession of recent years is that credit was cheap; there was also much deregulation and a great disparity between the wealthy and the poor.In both eras, people were borrowing money for new luxuries, but lowering wages prevented Americans from earning enough money to pay back their debts. This also translated into the housing market, and many citizens defaulted on the loans they took out to pay their mortgages.
Differences:
Despite the many similarities, there a few key differences between the two eras of 'depression'. One of the main reasons for the difference is that government leaders did not try to remedy the situation by producing and spending more money to try to remedy the situation.
During both the Great Depression and today's economic crisis, there is a high increase in the prices of goods followed closely by a fallout of prices that sent the market into shock. Both then and now we are plagued by deflation and unemployment. The unemployment then was 25% whereas now it is only 10%. During the great Depression, banks restructured their policies to provide insurance on deposits. This is a great difference between then and now. However, today there is a lot of stock market speculation which was part of why the stock market fell in the first place.
Great Depression: 1)Excess speculations Big names companies, like GE & Westinghouses, fell. Signs were ignored 2) Not agree, people before were really sturbing 3) Yes
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ReplyDeleteCara J Group 4
ReplyDeleteSimilarities
1. Both were preceded by an extensive period of credit-fueled bubbles. Before there was the Great Depression there was the Roaring '20s; likewise, before Depression 2.0 were the Greenspan NASDAQ and housing bubbles. Consistent with Austrian business cycle theory, the end result of a credit-fueled bubble will be a corrective recession that purges out the malinvestments resulting from an excessive expansion of the money supply.
2. Both were marked by government interventionist policies designed to prevent falling asset prices. For instance, bans on short selling occurred in 2008 and at the beginning of the Great Depression. Likewise, stimulus packages were the prescribed remedy at the onset of the Great Depression, and are in vogue once again now. It's worth noting they were unsuccessful back then, and don't appear to be succeeding now.
Differences
1. There is a lack of a gold standard, which serves as a restriction to how much the money supply can be expanded. The dollar was devalued relative to gold during the Great Depression, so there were attempts to circumvent restrictions on the money supply, but ultimately the gold standard was not fully abolished until 1971, and so the Federal Reserve was a bit more restricted in how much money it could create. This restriction does not exist today.
2. America was not as debt-ridden during the Great Depression as it is today. Credit cards are a rather new creation, and the national debt and deficit spending were significantly lower.
3. America's debt is owned largely by foreigners. This introduces the possibility of economic warfare; foreign debt owners can devalue the dollar by selling Treasury bonds as well dollar reserves.
4. All major currencies are fiat currencies, and the US dollar is the world's reserve currency. This helps the United States in a way, as central banks have been inflating their money supply along with the US dollar to maintain parity of sorts. In this way, the US gets to export its inflation.
This comment has been removed by the author.
ReplyDeleteGroup 4 Comments
ReplyDeleteBoth depressions were based speculation and affected the American Economy
Both depressions rapidly spread.
In both, people borrowed and and invested against their loaned amount. And then lost both their asset and they owed future earnings off of that.
In contrast the "worst" depression is affecting global economies due to the fact that we are a global society. Compared to the "great depression" war was how the global society was affected.
Contrasting further citizens of the US were the investors American and were only indebted to ourselves. Where as currently US debt is owed to foreign countries
Currency during the Great depression was backed by the gold standard where as today money is printed by the treasury and controlled by the Federal Government.
It is called the worst depression because it is greater than the first.
I am not overly knowledgeable about the causes of the current crisis and am not familiar with the concept that the current economic situation is being called the "worst depression"; however, the main thing that stuck out to me in the video that compares to our current economic situation was the mentioning of high employment rates. This is a constant topic of discussion today, especially in the presidential campaigns. I actually just read an article yesterday that 1 out of 2 college graduates from the class of 2012 will be or are unemployed or jobless.
ReplyDeleteDuring the Great Depression, the video made it seem like the financial situation changed very quickly and dramatically, where as today, I feel like it has been a gradual decline over the past decade.
Sarah and Andrew "Compare/Contrast"
ReplyDeleteCompare
-Bailouts.
-Job Loss.
-High unemployment.
-Inflation.
-Protests from the public.
-Budget cuts.
-Homelessness.
-Economic declines: more significant in great depression.
-Increase in money supply.
Contrast
-Great depression printed more money than they had gold to back up the value of.
-Great depression reformed banking system from what it was.
-Great depression government put in more security measures in banking and borrowing.
-Great recession banking remained the same.
-Great recession gold backed value of dollar but currently in debt from borrowing from other countries.
Similarities:
ReplyDeleteThere are several similarities between the Great Depression and the Great Recession of recent years is that credit was cheap; there was also much deregulation and a great disparity between the wealthy and the poor.In both eras, people were borrowing money for new luxuries, but lowering wages prevented Americans from earning enough money to pay back their debts. This also translated into the housing market, and many citizens defaulted on the loans they took out to pay their mortgages.
Differences:
Despite the many similarities, there a few key differences between the two eras of 'depression'. One of the main reasons for the difference is that government leaders did not try to remedy the situation by producing and spending more money to try to remedy the situation.
To add to the last sentence, the government leaders during the Depression of 1929 were not willing to make and spend more currency.
DeleteDuring both the Great Depression and today's economic crisis, there is a high increase in the prices of goods followed closely by a fallout of prices that sent the market into shock. Both then and now we are plagued by deflation and unemployment. The unemployment then was 25% whereas now it is only 10%. During the great Depression, banks restructured their policies to provide insurance on deposits. This is a great difference between then and now. However, today there is a lot of stock market speculation which was part of why the stock market fell in the first place.
ReplyDeleteNice Job! :)
DeleteGreat Depression:
ReplyDelete1)Excess speculations
Big names companies, like GE & Westinghouses, fell.
Signs were ignored
2) Not agree, people before were really sturbing
3) Yes
:)
ReplyDelete