Differences Between The Great Depression And The Great Recession

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The Great Depression was a severe worldwide economic depression that took place during the 1930s. The Great Recession was a period of general economic decline in world markets beginning around the end of the first decade of the 21st century. Although the Great Recession and the Great Depression happened in two periods, there remain differences between the two events. Differences explicitly pointed out between the recession and the Great Depression include the facts that over the 79 years between 1929 and 2008, great changes occurred in economic philosophy and policy, the stock market had not fallen as far as it did in 1932 or 1982, the 10-year price-to-earnings ratio of stocks was not as low as in the 1930s or 1980s, inflation adjusted U.S.…show more content…
Between 1929 and 1932, the United States’ Gross National Product (GNP) dropped by 33% and worldwide GDP fell by an estimated 15%. By comparison, worldwide GDP fell by less than 1% from 2008 to 2009 during the Great Recession.[3] Even after the Wall Street Crash of 1929 optimism persisted for some time. The stock market turned upward in early 1930, returning to early 1929 levels by April. This was still almost 30% below the peak of September 1929. By mid-1930, interest rates had dropped to low levels, but expected deflation and the continuing reluctance of people to borrow meant that consumer spending and investment were depressed.[4] By late 1930, a steady decline in the world economy had set in, which did not reach bottom until 1933. During the depression, millions of the unemployed wandered around in the street, everywhere is full of pain and sadness. Banks fail, credits dry up, industry’s profits fall and consumers’ purchasing fall, even the international economy…show more content…
Monetarists believe that the Great Depression started as an ordinary recession, but the shrinking of the money supply greatly exacerbated the economic situation, causing a recession to descend into the Great Depression. Economists and economic historians are almost evenly split as to whether the traditional monetary explanation that monetary forces were the primary cause of the Great Depression is right, or the traditional Keynesian explanation that a fall in autonomous spending, particularly investment, is the primary explanation for the onset of the Great Depression.[8] However, the gold standard was the primary transmission mechanism of the Great Depression. Even countries that did not face bank failures and a monetary contraction first hand were forced to join the deflationary policy since higher interest rates in countries that performed a deflationary policy led to a gold outflow in countries with lower interest rates. Under the gold standards price-specie flow mechanism countries that lost gold but nevertheless wanted to maintain the gold standard had to permit their money supply to decrease and the domestic price level to decline.[9] Comparing to it, there are many other influence factors, like trade imbalances, housing bubbles and high private debt

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