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Comparison between 1929 1933 crisis and 2008 2018

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If the financial crisis of 1929 bears an eerie resemblance to that of 2008, the political reactions that followed seem different… At least for now. The American economy is flourishing The American economy in the 1920s is a prosperous one.

Commentary: A Brief History of US Economic Crises: 1929 - Present

Industrial production, in particular in the automobile sector, was booming. In recent years, the US economy also boasted strong figures: GDP per capita rose by 2. With economic growth comes frantic speculation, both in this century and the last In 1927, 577 million stocks are bought and sold on the New York Stock Exchange.

1929/2008: similar causes, similar consequences?

The following year, 920 million stocks are exchanged on Wall Street. Today, the volume of traded stocks is even huger: But the variation between 1927 and 1928 is similar to that between 2007 and 2008. Easy credit In the 1920s, the prosperous economy makes it easier to contract a credit loan. Financial speculation attracts many would-be traders.

  • Many crises have occurred both before and after the 1929 stock market crash; however, the length and depth of the Great Depression has made it the point of reference for judging the severity of a financial crisis;
  • The US real economy was showing signs on a slowdown long before the stock market crash;
  • However, spending on the New Deal was far smaller than on the war effort.

Financial markets then speculated on these mortgages. Markets have experienced similar losses in both crises. According to Robert Parker, vice president of Credit Suisse Asset Management, the market fell as fast in 2008 than in 1929, if not faster.

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After Black Thursday, October 24 1929, several smaller scares hit markets from 1930 to 1933. Source, Economica 2001, Financial Crisis Since the summer of 2007, banks once again find themselves at the forefront of the crisis: It will be more interesting to compare both post-crisis periods. One question keeps nagging economic leaders: Yes, one could say, judging from the spur of activity from federal reserves, central banks and governments: For the past year, the Fed has deliberately maintained a certain liquidity in financial markets, by keeping interest rates low.

U.S 1929 Great Depression vs. 2008 financial, housing, credit crisis

That strategy was adopted by most Asian and European central banks, which lowered their benchmark interest rates in early October. This allowed financial markets to rebound temporarily, but with little confidence and optimism from investors, the market low lasted nearly three years, and cash became scarce. Government inaction in the face of the crisis was largely blamed on US president Herbert Hoover, paving the way for Franklin D.

  • Does anyone really believe the automakers will be selling hundreds of thousands of cars and trucks again in 30 months?
  • Comparing the Great Depression and the Global Crisis Derek McKenna , May 1 2013, 4558 views This content was written by a student and assessed as part of a university degree;
  • As a result, flows of credit dried up and economies the world over started to suffer.

At the time, governments favoured protectionist policies, believing they could boost the economy from the inside. Worldwide trade had declined. Today, we seem to have avoided that type of scenario, notably thanks to the industrial and consumerist boom in emerging countries like China, India and Brazil.

  • There are others such as Temin 1976 who suggests that monetarist explanations are wrong, and it was consumption and spending that declined first, therefore leading to a tightening of the money supply;
  • When we look to the rates of unemployment over the past number of years, it seems like the American policy of stimulus may be working slightly better than the European austerity agenda;
  • Kindleberger 1986a , taking a similar monetarist position but focusing more on international factors, suggests that the world depression stemmed from reparations and war debt, the overvaluation of the pound, the return to the gold standard in Britain and an undervalued French franc;
  • Cost-plus pricing in munitions contracts guaranteed businesses a profit no matter how many mediocre workers they employed or how inefficient the techniques they used;
  • The subprime mortgage crisis is illustrative of this;
  • Cost-plus pricing in munitions contracts guaranteed businesses a profit no matter how many mediocre workers they employed or how inefficient the techniques they used.

The American recession really began to hurt between 1930 and 1935, with massive unemployment. It is therefore too early to determine whether industrial countries will escape another Great Depression.