Custom «The Great Depression and the Great Recession» Essay Paper Sample
The Great depression was a global economic despair that struck the world in 1930s (David, 2011). This great depression had devastating effects to all countries whether rich or poor. This is similar to what today's great recession is associated. During the great depression, individual incomes, tax revenues and the organizational profits and product prices came tumbling down. This caused the global trade to sink by about a half to two thirds. Great recession experienced in the globe today has similar effects. The per capita income has gone down significantly due to job loss and poor performance of the businesses. This has not chosen particular nations, but just like the great depression even the rich and he super powers are the most affected. This current global recession has led to the closure of businesses such as the Layman brothers and the sale of others such as American International group, which is similar to what the great depression influenced in early 1930s and 40s (Bruce, 2009).
During the Great depression, levels of unemployment rose to almost 26% in USA while in some nation sit even went to 32%. The majority of the world great cities were hard hit. The most affected were the cities that were reliant on heavy industry. In many of the countries during the great depression, construction was stalled. Farming and the crop prices in the majority of the agricultural based nations fell to the tunes of at least 60%. Same characteristics are noticeable with the current global recession. Unemployment is way beyond control, heavy manufacturing industries are closing down and the city economies, which are dependant of the industrialization revenues, are hard hit.
The great depression in 1930s was caused by the credit crunch. It was critical for investors, and they had to put a 10% of the stock value on a single stock. This was such that if an investor was worth $1000 dollars and he, or she was willing to acquire a stock worth $10, he was able to procure 1000, as opposed to the prior 100 stocks, (Ritholtz, 2009). In such circumstances, it was justified to argue that if the stock appreciated to a price of $15, to total; stock worth would shift to $15000. In this situation, one was supposed to return the initial investment of $9000 and gain $6000, which was inclusive of a $5000 proceeds. When the opposite happened, the investees did lose the total figures of their investment. These investors became broke, and the financial institutions had to ask for more money if the investor had to keep the credits. Failure to get this money, the financial security, procured the stocks and a 10% further decline left the bank with so much to pay to the investors, a thing that resulted to their grounding.
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In today's great recession, the economy has created amounts of credit balance. It is argued that the credit cards are going high, mortgages are surging and much worth of credit still lies with the financial institutions. The current recession is thus varied from the great depression, in terms of the credit value.
Between 1930 and March of 1933, fifty percent of banks had failed in operations due to the great depression. This translated to a closure of 9,096 financial institutions. However, between 2007 and May 2009, only 0.6% of the global banks hard reported failure, which is equivalent to 57 banks in the globe. There is a similarity in that under both circumstances, the great depression and the current recession bank failures are reported. The variation is there still in that, the magnitude of closure in the great depression was to the tune of 50%, while in the current recession, it is a representative of 0.6% that has closed down.
The unemployment rate in the great depression was 25% while, in the current global recession, it stands at 8.5%. This due to the economic decline during the Great depression was equivalent to -25.5% while, in the current recession, it is -3.3% (Polanyi, 1994). In this context, the great depression and the recent recession are related in that they both show a negative figure of economic performance.
The commodity changes in price during the great depression were to the tune of -25% while, during the current recession, the price changes are towards the positive; a change of +0.5%. This is a positive variation between the two periods of economic troubles.
During the current recession, the industrial production was not that hard hit when compared to the situation during the great depression. Experts, however, argue that the dramatic acceleration during the last quarter, has brought industrial production down to a levels we could conclude we are experiencing half of the great depression. The change in industrial production during the great depression and the current great recession looks as follows graphically.
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However, a similarity, due to the decline, industrial production under the great recession is way up and better as opposed to the situation during the great depression. The variations between the two periods are significantly varied upon comparison though they may be shooting towards the same direction. Great depression did affect the global economies in ways that were grave and which stalled development. Effects span from complete stalling of any developmental construction to closure after failure of financial institutions. This is opposed to what the great recession has led to because, despite reporting of various hiccups, the rate of failure and closure of financial entities for instance, stands at 0.6%, which is way below the 50% reported during the great recession. Thus, it is reasonable to conclude that, the great depression had adverse effects to the global economy as opposed to the current great recession when compared.