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Simple details about the most complicated economic times

in American history

 

 

The Great Depression – Comparisons To Today’s Recession

Please note: For even more details about the causes and effects of the Great Depression, visit this website.

 

The Great Depression began in 1929, after a stock market bubble that grew throughout the 1920s and burst in spectacular fashion on October 29, 1929, Black Tuesday. The Great Depression continued until 1941, when America prepared for and entered World War II.

 

In that twelve-year span, President Franklin D. Roosevelt, across three terms, instituted a variety of programs aimed at putting Americans back to work and providing assistance for the poor, but what ultimately healed the economy was the stimulus provided by war efforts.

 

Unemployment reached 25% during the Great Depression (in 1933), and 11,000 of the nation’s 25,000 banks failed. There were runs on banks, people lost their life savings, farmers lost their livelihood when drought conditions known as the Dust Bowl ruined their farmland, and shantytowns sprung up all across the country.

 

There are similarities between Great Depression economic crisis and today’s economic crisis:
•both were fueled by speculation and leverage-buying (in stocks in the Great Depression, in houses in today’s recession);
•both were worsened by bank troubles (from a run on banks in the Great Depression, from a weakening of banks because of poor lending practices in today’s recession);
•both were expanded by high unemployment rates, which led to drops in consumer confidence, which led to less purchasing, which led to higher unemployment rates;
•both spread to a global crisis, with America’s troubles leading to worldwide troubles and visa versa.

 

The main difference today is that there’s been quicker response and more decisive action. Both the Bush Administration and the Obama Administration, in 2008 and 2009, authorized the use of trillions of dollars to solve the crisis.

 

In contrast, virtually nothing was done while Herbert Hoover was in office from 1928-1932, and Roosevelt assume the presidency until the Great Depression had been underway for almost four years. In Roosevelt’s “First Hundred Days,” he implemented a number of regulations and programs, but problems were so widespread at that point, that it took many more years for the economy to stabilize and recover.