A Historical Comparison on Great Recession and Great Depression: From Economics Point of View

A Historical Comparison on Great Recession and Great Depression: From Economics Point of ViewAIPERI ISMAILOVA, JOHNATHAN IVES, MILES KINNAMONT, LAYLA LEE

Great Depression & Recession

Historical explanation for both the Great Depression and Great Recession

The Effects these Economic problems had on the US Economy

What the US did to fix these problems

Great Depression: Stock Market Crash

October 23 1929 Stock Prices plummeted in the last hour of trading.

While the market was closed investors panicked. On October 28th “ Black Monday” the Dow Jones had dropped

13% The next day “ Black Tuesday” investors exchanged 14.6 million shares of stock. Sharp decline of the market caused demand for goods to decline. 25 Billion Dollars lost in crash

Bank Failures

Between 1929 to 1933, over 9000 banks suspended operations due to financial duress.

Many Speculations to why this happened Bank Panics due to decrease in Money Supply Bank Failures due to decline in GDP

Decline of Consumer Spending

The Stock Market Crash Caused a collapse in durable and non-durable goods spending

High unemployment rates Gold Standard Crisis

Us went off the Gold Standard

Great Recession: Housing Market Crash

Subprime Mortgages defaulted Between 2007-2012, 4 million households were foreclosed,

which led to more houses to become foreclosed 19.2 Trillion Household wealth was lost Household net worth fell considerably Lehman Bros. went bankrupt Other Institutions: Freddie Mae, Fannie Mac AIG, Merrill Lynch

Declining Consumer Spending

US Consumption declined in 2008 Decline in consumption caused a sharp decline of wealth

Comparison of GDP

Comparison of Unemployment Rate

Comparison of CPI

International Real GDP

International GDP Cont.

Great Depression Solution

The Banking Act of 1933 Federal System of Bank Deposit Insurance Regulation of the combination of commercial and investment

banking and other restrictions on “speculative” bank activities SEC and the Securities Act of 1933 Trust Indenture Act of 1939 Established FDIC

Great Recession Solution

Interest Rates on Loans decreased Policies were put in place to prevent sub-prime mortgages Tax Relief Act of 2010 Troubled Asset Relief Program

Purchase Assets and Equity from financial institutions to strengthen the financial sector

Conclusion

Giant Declines in Economic Activity Big Market Failures GDP, Unemployment, and CPI were similar, but the Depression

was much more devastating Different Policies such as Banking Act of 1933 and the Tax

Relief Act of 2010 were formed to fix the problems So the Business cycle repeats itself starting with the Great

Depression and ending with the Great Recession

Questions?