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great depression to great recession

a comparison of past and current crises

Tania Carmona

on 20 April 2010

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Transcript of great depression to great recession

Double click anywhere & add an idea The Great Depression
The Great Recession
began in 1929 and lasted until about 1939 Bank Failures Stock Market Crash of 1929 Reduction in Purchasing Across the Board American Economic Policy with Europe Drought Conditions Throughout the 1930s over 9,000 banks failed 50% . Bank deposits were uninsured and thus as banks failed people simply lost their savings. Surviving banks, unsure of the economic situation and concerned for their own survival, stopped being as willing to create new loans. individuals from all classes stopped purchasing items. This led to a smaller number of items produced and then reduction in the workforce. As people lost their jobs, they were unable to keep up with paying for items they had bought through installment plans and their items were repossessed. More and more inventory began to accumulate. The unemployment rate rose above 25% which meant, of course, even less spending to help alleviate the economic situation. As businesses began failing, the government created the Smoot-Hawley Tariff in 1930 to help protect American companies. This charged a high tax for imports thereby leading to less trade between America and foreign countries While not a direct cause of the Great Depression, the drought that occurred in the Mississippi Valley in 1930 was of such proportions that many could not even pay their taxes or other debts and had to sell their farms for no profit to themselves. This was the topic of John Steinbeck's The Grapes of Wrath. the stock market crash that occurred on Black Tuesday, October 29, 1929 is one and the same with the Great Depression. In fact, it was one of the major causes that led to the Great Depression. Two months after the original crash in October, stockholders had lost more than $40 billion dollars. Reversing the Downturn Herbert Hoover started numerous
programs,all of which failed to bring aid June 1930 Congress approved the Smoot-Hawley Tariff Act which raised tariffs on thousands of imported items. The intent of the Act was to encourage the purchase of American-made products by increasing the cost of imported goods, while raising revenue for the federal government and protecting farmers. However, other nations increased tariffs on American-made goods in retaliation, reducing international trade, and worsening the Depression President Hoover and Congress approved the Federal Home Loan Bank Act, to spur new home construction, and reduce foreclosures. Emergency Relief and Construction Act (ERA) was the final attempt of the Hoover Administration to stimulate the economy by including funds for public works programs such as dams and the creation of the Reconstruction Finance Corporation (RFC) in 1932. The RFC's initial goal was to provide government-secured loans to financial institutions, railroads and farmers. Then Came FDR... Roosevelts efforts for recovery * Instituting regulations to fight deflationary "cut-throat competition" through the

* Setting minimum prices and wages, labor standards, and competitive conditions in all industries through the NRA.

* Encouraging unions that would raise wages, to increase the purchasing power of the working class.

* Cutting farm production to raise prices through the Agricultural Adjustment Act and its successors.

* Forcing businesses to work with government to set price codes through the NRA.

These reforms, together with several other relief and recovery measures, are called the First New Deal.
Economic stimulus was attempted through a new alphabet soup of agencies set up in 1933 and 1934 and previously extant agencies such as the Reconstruction Finance Corporation.

By 1935, the "Second New Deal" added Social Security (which did not start making large payouts until much later), a jobs program for the unemployed (the Works Progress Administration, WPA) and, through the National Labor Relations Board, a strong stimulus to the growth of labor unions woosh recovery from the Recession ws about from 1937-1938, there was a stop further expansion of the New Deal and, when unemployment dropped to 2%, they abolished WPA, CCC and the PWA relief programs. Social Security, however, remained in place. ouch. One visible effect of the depression was the advent of Hoovervilles. "Hooverville" was the popular name for a town of cardboard boxes built by homeless men. Housing Bubble A combination of low interest rates and large inflows of foreign funds made easy credit. More and more people took easy home loans.

demands for property increased and fueled the home prices further.

As there was enough money to lend to potential borrowers, the loan agencies started to widen their loan disbursement reach and relaxed the loan conditions.

Credit Crunch financial institutions stop lending as much and tighten their standards this behavior has resulted in a classic credit crunch. Uncertainty, fear and lack of credit are necessary ingredients of recessions. Bannk failures 57 – 0.6% of banks
(Dec. 2007 – May 2009) Reduction in purchasing across the board People quite buying stuff and therefore production lowered and people layed off. ex:automobile industry 2000's to about now were still hangin in there Getting nowhere in reversing the downturn calls for quick, temporary tax relief to spur economy Dispersed stimulis checks to jumpstart economy ouchie Modern day hooverville Then Came Obama..... Bush Stimulus bill Creating more jobs
whoopty doo causes causes Depression be gone woooooosh???? Hopefully we make it out alive the supreme court ruled some of these alphabet soup programs unconstitutional the end yay!!!! Nearly $1 trillion in tax increases on families with income over $250,000
over next decade
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