Money and Banking

The stock market collapse of the 1929s was the greatest financial crisis the United States had ever experienced and was the start of the “Great Depression.” The depression was disastrous for many American families, and the suffering they went through was world renown. Thus when the financial disaster hit in 2007 and the housing bubble burst, a lot of people proclaimed it the coming of the next “Great Depression.” In this article, we will compare and contrast the characteristics of the financial crisis in 1929s and the late 2000s. To accomplish this, we will first look at the circumstances that caused the 1929s economic collapse. Secondly, we will look at how the economy reacted to the economic collapse and what actions were taken as a result of. Thirdly, we will explore what specifically caused the 2007 economic recession allowing us to compare and contrast pre-recession periods. Fourthly, we will analyze lessons that were learned by the Federal Government during the Great Depression that resulted in monetary or fiscal policies during the current economic crisis. Finally, we will conclude with a conversation about the main points of both economic downturn and look at the long run toward recovery.

Capitalism “is an economic and political system in which a county’s trade and industry are controlled by private owners for profit, rather than by the state (Marriam-Webster Dictionary).” Many other economic downturns have transpired both prior to and after the 1929 stock market collapse; however, the duration and severity of the Great Depression made it the measuring stick for every other economic downturn since. But what caused the Great Depression has been a great debate. While many analysts will point to the stock market collaps...

... middle of paper ...

... the values of the bonds. Therefore, when the crisis hit it wiped out the value of the bonds and investors lost their money.

The United States was not the only nation to experience problems economic problems during the economic crisis in 2007. In Europe, trade imbalances particularly in exports produced by the vast wealth in Germany produced more credit than what was required. This led to easy access to inexpensive credit to be used by other European countries within the Eurozone. Countries such as Ireland and Spain took advantage of this credit increasing consumer debt. Then when the crisis hit consumers started defaulting on their financial obligations. Compounding the problem was the European Central Bank lacked regulatory policies and liquidity responsibilities as such there was no system in place to handle the unique problems the financial crisis provided.