Almost seventy years after the worst economic crisis struck the world in the 1930s, history repeats itself again. The Great Depression that occurred in 1929 and today’s great recession have many similarities. Both had disastrous effects on the global economy. Like today, many years of economic deregulation paved the way for these turmoils and social troubles. Banks were giving away cheap credits without running any background information on their customers. People took advantage of this and started buying houses and other luxuries they couldn’t afford. Default in paying back their mortgage led to many problems such as real-estate crisis, rising inflation, soaring unemployment rates, and stock market crash.
The 1920s, also known as “The Roaring Twenties”, had been an unexampled success in America’s stock market. Investors tried to benefit from this upturn. They started digging in their own savings and buying stocks on margins. Stock brokers were charging high rates for investors who desired to purchase stocks on margins but this did not matter for them because the market was rising sharply in a fast pace. From the beginning to the end of this decade, stocks more than quadrupled in value. Stock prices started to unexpectedly decrease in October 21, 1929. In less then a week, the market lost approximately 25 percent of its value. This created a wave of fear around the nation. People began to sell massive quantities of their stocks. On Tuesday, October 29, after a week from the sudden fall, the market severely crashed, so much that some stocks couldn’t be sold at any price. This day became known as “Black Tuesday”.
In the beginning of the 1920s, banks started to encourage their customers to acquire cheap credits to finance their homes and other utilities. Real-estate market was exceptionally prosperous. The number of Americans owning their own homes reached an unprecedented record of forty nine percent. A similar phenomenon occurred between the years of...
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