Though it kind of feels the same…
- In both time periods banks closed, recovery seemed long and painful, and the general country’s mood was negative about the future .
- During both crises the banking system was crippled by bad loans due to stock speculation.
- During both crises banks loaned significantly less money, which slowed the economy even further.
…this is just a teaspoon of hurt compared to the tsunami of financial pain caused by the depression.
- During the Great Depression unemployment in the U.S. rose to 25%, whereas the current unemployment rate is only 10.4%
- Because deposits weren’t insured during the great depression millions of Americans watched their deposits literally dissapear.
- During our meltdown the DOW lost about 42% from it’s Oct 9th in 2007 to Oct 27, 2008. But during the years coming after the Great Depression, the DOW had fallen 89%.
- The word “depression” became so terrifying that economists have ever since stopped using it to describe economic downturns, they’ve been called recessions.
- Perhaps the greatest difference is between the crisis of today and the great depression is how quickly the government and banks have acted to try to stop the me
Is the current economic meltdown comparable to the Great Depression?
Though it kind of seems the same, there are crucial differences between the two economic scenarios. On October 25, 1929, the day after the stock market crashed, newspaper headlines discussed the disaster in calamitous terms. The Daily News announced, “Billions Lost in Wall St. Debacle,” and ran a picture of a newspaper seller swamped with customers desperate to find out accurate stock price levels. The October 24, 1929 edition of the Brooklyn Eagle shouted, “Wall St. In Panic as Stocks Crash: Stocks Crash in Rush to Sell, Billions Lost.” Directly beneath this ominous headline ran another, unrelated story about the attempted assassination of the crown prince of Italy, as if to underscore the sudden, worldwide panic that was sweeping the globe.
In contrast, the newspaper headlines discussing the economic meltdown of 2008 were somber but definitely more subdued. The November 21, 2008 edition of the New York Times announced, “Stocks Drop Sharply and Credit Markets Seize Up,” and a sidebar notified readers that the “Dow Falls 5.6% Amid Worries Over Banks.” The Financial Times headline was more portentous, and focused on the global impact of the financial crisis, shouting “Market Crash Shakes World.” Under that headline, four different pictures of people (presumably traders) showed their faces frozen in disbelief, while a statistic ran above each picture: “Tokyo Down 24%, Frankfurt Down 21.6%, London Down 21.1%, New York Down 18%.” Underneath these photos, another sub-headline announced, “US Stocks Suffer Worst Week Since Depression,” but are the two economic crises really that similar?
There are a few striking similarities between the two financial crises:
- In both 1929 and 2008 banks closed, recovery seemed long and painful, and the country’s general mood was negative about the future;
- During both 1929 and 2008 the banking system was crippled by bad loans due to stock speculation; and
- During both 1929 and 2008 banks loaned significantly less money, which slowed the economy even further.
However, the financial crisis of 2008 is just a teaspoon of hurt compared to the tsunami of pain caused by the Great Depression. Following are a few key differences that show how much more severely the Depression impacted the economy:
- During the Great Depression unemployment in the U.S. rose to 25%, whereas the current unemployment rate is only 10.4%;
- Because deposits weren’t insured during the Great Depression millions of Americans watched their deposits literally disappear;
- During our meltdown the Dow Jones lost about 42% from October 9, 2007 to October 27, 2008. But during the years coming after the Great Depression, the Dow Jones had fallen 89%;
- The word “depression” became so terrifying that economists have ever since stopped using it to describe economic downturns, they’ve been called recessions; and
- Perhaps the greatest difference is between the crisis of today and the Great Depression is how quickly the government and banks have acted to try to stop the meltdown.
