1. The Great Depression started by the future expectations financially were high, as many items peaked in prices and climbed further up. However this led to people overinvesting and relying too much on the future expectations. As real estate gradually fell from its peak back in the mid-20s from an excess supply of them and the US Government, the market gradually became unstable right up till Black Tuesday hit. It signaled panic buying and selling of shareholders. The great depression made a further impact to the worth of the US dollar when they raised interest rates to maintain the currency and that it was primarily based on the ownership of gold the government had.
2. The Current Recession was started by Banks creating sub-prime mortgages for people that couldn’t afford to pay off the whole mortgage. The result was that the Banks acquired these properties for foreclosure, however weren’t able to recover most of the mortgages because many couldn’t afford any of these foreclosures, resulting in the breakdown of the banking systems in most of the world, resulting in the stock markets crashing in a similar fashion. This eventually led to the stock market crashing on the news that Lehman Brothers were filing for bankruptcy and it became a snowball effect of people frantically selling their assets to recoup whatever they had left.
3. The Government took part in the great depression by introducing employment programs to help employ numerous people that were greatly affected by the depression. They also increased the interest rates to maintain the worth of the US currency. However their efforts did not help the situation greatly, until WWII as they needed a substantial amount of people to be employed.
During the current recession, the US government had handed out bail-outs to several corporations most notably: AIG, General Motors and Chrysler LLC. However they didn’t offer a bailout to Lehman Brothers and as a result, they filed for Bankruptcy.
4. The factors that are present now that were not present during the Great Depression are that in the modern era, credit cards are a common form of payment. This gives individuals an advance period to pay for their purchases, while instating a high interest rate to penalize individuals who fail to pay their bills on time. This is a common way for individuals to become bankrupt due to insufficient funds. Another factor would be having the internet as a resource for news and advice. People can constantly monitor their financial assets as it changes. This would trigger individuals to take immediate action and sell their assets to maintain as much funds as possible.
5. These two events affected the United States GDP greatly. In the Depression, unemployment was at an all-time high. People couldn’t afford luxuries anymore and had to resort to digging into their savings in order to pay for necessities. The production output of products low due to the overall demand declining, therefore affecting the exportation of these products and generated revenue from outside sources. During the current recession, government spending had been excessive as they tried to pull companies from the verge of bankruptcy. This was mostly due to companies not having free cash flow available as the banks have no money to loan out, therefore couldn’t approve any loans. This eventually lowered output of production and caused consumers to look elsewhere, while tight on cash.
6. I feel that the great depression had a greater impact on the world. This is mostly due to the “bottomless pit” people in this era created for themselves physiologically. People thought there was no ceiling to the highs of the financial markets. They took out money from the bank system and gambled with it. Eventually this led to the downfall of the bank system which essentially triggered the great depression. People all over the world didn’t have money. There was nothing to spend on. Gold was the standard for currencies and the government tried to dilute it as much as they could in order to preserve the currency. This led to the lows of importation and exportation as companies realized the actual costs. And it was only until WWII that it created jobs and increased the GDP all over the world. It may have been a big impact negatively; however it created a huge positive impact that took most countries out of the depression. The current recession wasn't as huge of an impact due to the certain circumstances that occurred. However both of these events could have been avoided if certain circumstances were taken.
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