The Financial Crisis and The Great Depression Free Essay Example, 1000 words

The recovery that was seen in the periods after 1933 was rapid, but not rapid enough to completely reverse the effects of the depression. Another point of similarity is that both of them were preceded by asset price booms and bursts. There was a housing boom and burst in the 1920s and the Wall Street boom and crash around 1929. Similarly in 2006, there was a mortgage related housing boom and burst, leading to the 2008 crisis. Another similarity lied in the fact that both the crises led to massive unemployment resulting from layoffs. When the industrial production shrunk, the industries had no choice but to send a portion of the employee’s home. The differences between the two economic hardships the world faced were their causes and the times they occurred. It is often thought that the great depression was a result of the effects of the world war during which a lot of destructions happened, and some of the things that held the world economy together were affected severely. We also have generational differences in the sense that one took place in 1929 and another about 80 years later. We will write a custom essay sample on The Financial Crisis and The Great Depression or any topic specifically for you Only $17.96 $11.86/pageorder now There was deflation in the industrial output, meaning a decrease in the overall size of production in the manufacturing sector. The layoffs meant that the disposable income reduced. Much of the recovery started in the times around and after 1933. Some of the differences between the great depression and the current economic difficulties including the 2008 credit crunch lie in a number of things, which include a number of things. In 1929, there was a concentration of industrial activities in the European nations and the United States. In 2008, even the nations that hadn’t invested in industry by the 1920s had some amount of industrial production going on in them. The effects of the two economic periods are similar in the sense of shrunk industrial production (Cooper, 2008). The difference here is that whereas the 1929 situation only affected the then industrialized nations, sparing those that hadn’t invested in industry, the 2008 situation affected each and every country of the world, because virtually all the countries of the world have an industrialized economy, no matter how small. Another difference between 1929 and the 2008 situation was that the great depression of the late 1920s and the early 1930s was an old fashioned version of banking liquidity crisis that resulted from the failure by federal bank to serve as a lender of last resort. The 2008 crisis resulted from a bank solvency crisis.