How Is the Current Recession Acting Like/Unlike the Great Depression

Topics: Wall Street Crash of 1929, Subprime mortgage crisis, Recession Pages: 5 (1617 words) Published: February 17, 2011
How is the Current Recession Acting like/unlike the Great Depression Shao Shuai
ECO 473
Dennis Foster
November 30th, 2009

How is the Current Recession Acting like/unlike the Great Depression Nowadays, the economy of the world plunges into an awkward situation. The entire world meets a global economic crisis or recession, especially in the United States. After World War Ⅱ, this recession is the biggest recession for the America. Most of people express worried about this recession; absolutely they recall the memory about the Great Depression which was the most enormous economic crisis in the American history. They are anxious because it seems like the United States is going through another Great Depression or will go through another Great Depression. From the history, everyone knows how serious the result came out from the Great Depression; it baffled human beings’ development. No one wants to see another Great Depression happen again. However, there are sufficient reasons to support public people to worry about the Great Depression will happen again, because present recession and the Great Depression, both of them have some similar characteristics. Meanwhile, both of them have much unlike points also can prove the Great Depression will not happen again. In this paper, I will compare and contrast the current recession and the Great Depression, I will prove the current recession causes the effects will much less than the Great Depression, and the Great Depression will not replay. Back to 1929~1933, on October 29 1929, the “Black Tuesday” came to the United States. On this day, American financial world crashed, the stock’s price fell from top to bottom, fell 40 percentages from 383, also the Dow Jones stock index fell 22 percentages(Baidu, 2009). From this date to November 13th 1929, there was thirty billion disappeared in the market, this number equal to the total expenses of World WarⅠ. However, the crash of the stock market was just the beginning of a horrible economic crisis. Even through the Great Depression began at the collapse of the stock market; many experts still thought the influence from the collapse of the stock market was limited, because stock was just a little part of family’s property, it cannot affect Marginal Propensity to Consume(MPC) very much. However, the “Black Tuesday” was merely the beginning of the terrible issue, was just miniature of the Great Depression. The Great Depression caused a bunch of extremely serious social problem, for example, there were about 2 million to 4 million students had to drop their school. Even some people could not suffer the pain from mentality and physiology then suicide. The most significant problem was that 8.3 million people lose their job; the unemployment rate reached such a high level which was 25%(Xu, 2009). Almost in every city, the poor people who were in line at the food bank as long as to several blocks. By the end of 1932, totally, there were about 2 million people roamed in the streets, there were no home for them. In September 1932, magazine Fortune estimated that 34 million people had no income; this population was 28% of the whole population of the United States. And at least 15 million people were looking for a job, but there was no job offer to them at that time (Baidu, 2009). Change the view to the economy. At the beginning year of the Great Depression, since the economy became weakness, it was hard for bank to get back of their loan, and the public people were anxious so that they went to the bank to withdraw their deposit. Therefore, at that time 50% was closed. The government took conservative measure, decreased the money supply so that more and more banks had to be closed. Consequently, 9000 banks had already closed and 130 thousands enterprises went to bankrupt. The total output of industry and nation income (NI) decreased 50%, the trade price of goods reduced one third and merchandise trade also cut two thirds...
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