Great Depression and Today's EconomyCompare and contrast the Great Depression to the crisis going on in the U.S today.  I have to do a speech on this.

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dbello eNotes educator| Certified Educator

The 1929 stock market crash which plunged the nation into 'The Great Depression' did not happen over night. The prosperity of the 1920's was in some sense an illusion, a 'false prosperity'. America, for the first time in its life bought 'on credit', and buy they did. The philosophy of credit in the 1920's had a 'give it to anyone' mentality. Manufactures produced goods at a faster rate than consumers could afford to purchase those goods.The resolution, make it easy to obtain those goods and everyone will continue to buy.Wrong, goods began to stack up on shelves,people started losing their jobs for the very products they produced which were first sold on credit and then not bought for cash or credit. Consumers could no longer afford to buy the products they produced. It could be argued that mortages on homes by the banking industry within the last decade followed the same suit. Although complicated the bottom line is this... deregulation in the banking industry as well as deregulation in the S.E.C. unleashed the monster known as greed.Banks extended mortages to people who couldn't financially handle their loans. Sold those mortages as 'mortage backed securities' on the stock exchange utilizing their 'good name' as security.When people defaulted on their mortages the value of the 'mortgage backed securities' fell. The financial 'reckless behavior' of the 20's, as banks made unwise decisions in loan approvals as well as poor investment choices seems to infected our economy again. Our most unfortunate mistake was this,in the 1920's we were for the most part sailing on unchartered territory.F.D.R.'s New Deal helped to define and establish a basic criteria to ensure economic stability. This nation held that definition and criteria for many years...The economic quagmire the U.S. faces today is the fault of both the Democrats and the Republicans. Both parties favored deregulation, perhaps with different points of view but the outcome would be same.Democrats saw deregulation as a way for more Americans to obtain 'The American Dream',Republicans cheered for free enterprise and a laissez-faire approach to business. No matter what you call it both parties,both sides, and consumers too should share the blame in this time of economic hardship.Something to think about...'Do the ends justify the means'????????

enotechris eNotes educator| Certified Educator

Stocks, like any other commodity, are subject to the economic forces of supply and demand.  Governments can and have attempted to intercede to create "stability" in the economy, but these measures will always fail in the long run. Economies function on the vibrancy of its components; restricting them weakens the economy. The population, in essence, votes with currency, purchasing what they attribute to be valuable, be it cars, houses, or stocks.  If enough do this, demand rises; if not, demand falls, and supply responds inversely in each case.  Trying to alter this economic rule is like trying to defy gravity. In a word, the similarities to the October 1929 Crash and the Current Economic Crisis can be summed up in "overspeculation."

In both cases, then and now, the government in allowing "easy credit," fueled this overspeculation, or ungrounded optimism.  However, specific causes between then and now are different.  Some of the regulations (Glass-Steagall) pertaining to mortgages that had been in place since the 1930's  were removed by the 1980's, causing the "bundling" of of stable and subprime mortgages, which were then divided up as "tranches" and sold to speculators.  Many of these contained bad loans, which could not be made good, which triggered the housing crisis, which has brought us to the current economic troubles.  Undoubtedly, corporations with greedy individuals played a part in this;  the corporate strategy of "IBG-YBG" ("I'll be gone, you'll be gone," implying someone else will end up holding the bag....and guess what?  That's going to be we, the taxpayers!) in making transactions had led to the inevitable tragic conclusions. The government should persecute these players for fraud, not attempt to regulate and further weaken the economy.

For an excellent article addressing many of these issues, read "The Death of Kings" in this month's (May 2009) issue of the New Yorker.

ladyvols1 eNotes educator| Certified Educator

The Great Depression was the greatest slump of the economy in the history of the world.  Today's financial crisis is hardly that grim, though it does share some similarities with the economic collapse of the nineteen -thirty’s.  Both the Depression and our weak economy today were preceded by a housing boom, a long period of cheap credit and a falling stock market.  Unemployment was high and the value of the dollar was low.  The production of goods dropped and industries were struggling.  Small businesses close and people who lived on credit must pay cash.  Without cash or credit people's spending stops and the demand for goods drops.  The companies lay off people because they don’t need the production which increases unemployment.  It is like a circle.  Basic economic principals come into play.  There are similarities, but if people won’t panic, according to the experts, we won’t reach that point in our history again.

mwestwood eNotes educator| Certified Educator

After reading John Dos Passos's USA Trilogy, which has part of the novel set around the time of the Great Depression, I see many parallels.  In fact, a recent issue of Newsweek has an interesting article that mentions, as does Dos Passos, how J.P. Morgan bailed out the government with millions. 

People have used the word socialism lately, as you know.  You might want to explore this aspect in your comparisons.

linda-allen eNotes educator| Certified Educator

The History Channel has a fascinating new documentary on the Depression, particularly the Dust Bowl. It's called "Black Blizzard." You'll from it a real understanding of how overfarming, drought, the stock market crash, and other events created a hard time not just for America but for the whole world.

gopikrishna | Student


Entrepreneurs all along the chain of production, from commodities to retail, geared up for demand that, in hindsight, was short-lived.A credit-fueled bubble that affected nearly every corner of the economy - encompassing everything from consumer credit, to business loans, to margin debt at stock brokerages - crested the following summer. Alas, historians have thoroughly documented what happened when this euphoria morphed into panic.In 1932, President Franklin D. Roosevelt was elected in a landslide on promises to take swift and decisive action. The foundation of this recovery involved devaluing the US dollar against its gold backing, and basically amounted to currency debasement and deficit-financed make-work programs. The cost of the New Deal - the brainchild of British economist John Maynard Keynes - was foisted upon future generations. When confronted with these long-term costs and the necessity of running budget surpluses to pay off debt incurred by his "demand management program," Keynes casually dismissed this critique with the statement that "in the long run, we are all dead." This is not to say that the US will escape unscathed. International accounts will be settled through further destruction in the value of the dollar. It must, and the Fed will do everything in its power to ensure the dollar's future devaluation. Whether it will be "successful" remains to be seen, but you can be assured that painful consequences will accompany unconventional Fed policy.

carolmills | Student

"Unless we learn for the past we are doomed to repeat it."

Take a look at Ancient Rome and it's decline as well. I think you will see a real parallel with our current American culture.

gaddym | Student

Both Obama and FDR embrace the idea of deficit spending to resolve economic turmoil, the idea being to stabilize the market by reducing volatility through various measures. Arthur Schlessinger Jr. and Burton Folsom Jr. both highlight two different perspectives of The Great Depression in “The Coming of the New Deal” and “New Deal or Raw Deal” respectively. Both Obama and FDR tried to create jobs by infrastructure development, and by affecting the money supply. While the cause of the Great Depression cannot be accredited to one source, it began with the agricultural market that eventually destabilized the rest of the American economy. Unemployment soared, and the government at the time was terribly limited in what it could do to intervene. Until 1937, the Commerce Clause restricted regulation of production of goods until the Supreme Court was forced to capitulate to FRD’s New Deal legislation as a result of FDR's court packing scheme. The present economic situation draws its genesis from high-risk mortgages issues as a result of Clinton’s expansion of the CRA in 1995. The Fed lowered interest rated and increased the monetary supply to try to stimulate economic growth. As in the Great Depression, conservatives attribute government involvement to the enduring economic instability whereas liberals claim that the government hasn’t done enough. This highlights the fundamental rift in economic schools of throughout: freemarket economics v. modern macroeconomic theory.

yujieinter | Student
maybe we are happy or misery, but less misery than the history books written in the future. we always symphasize with the antiquity. However, later the same to us.
msbandrfj | Student

try rewording the topic you are looking for. Some times The subject is to broad and needs certain key words. or check in different catergories.

krishna-agrawala | Student

The current recession in USA and elsewhere in the World is very similar to the the great depression of 1929-1932. The only difference between the two is that the magnitude of the current crisis is less than the earlier one.

John Kenneth Galbraith has written a very interesting and informative book on the great depression titled The Great Crash 1929, first published in 1954.

As explained by Galbraith the main cause of the great depression was the overoptimistic expectation about American people about the American economy in general and the stock market in particular. Because of this optimism people were ready to buy stocks at ever increasing prices under the false belief that the stock prices will continue to rise. This led to further increase in stock prices and further frenzy of buying. This had a spiralling effect. But it was too good to last for ever.

What finally led to the crash is cannot be identified with certainty. But that is not important. The stock market boom was like an continuously inflating balloon. It had to burst one day.

From the study of Indian Stock Market situation, which closely followed the pattern of events in US stock market, it is clear that the stock market was highly inflated just before the crash. In less than three years the stock market index had risen more than six times. Surely this cannot be anywhere near the real increase in worth of shares. So one day the balloon burst, and market crashed.

With this crash the optimisim was replaced by pessimism, and hope was relaced by dispair. And this widespread reduction in demand is not just because people have less money to buy things. To a great extent it is because people are more cautious in spending what they can, because they are not so sure of tomorrow.

marlon0607 | Student

this helps a lot... thank u all!!!

jenverasammy | Student

The great depression is much like what is going on in today's economy.  One part of your speech should be about the stock market, government involvement, presidents, the rate of unemployment.  I would look at black monday for a good start and compare the wars Iraq vs. wwII.