The Great Depression and the Financial crisis of 2007-2009 are the most serious economic crisis in the world history. The comparative analysis shows the similarities and differences between this two crisis.
The similarities:
1) The decline in GDP. According to the financial journals, during the Great Depression, the country GDP declined by almost 25%, in 1929 – from $103.6 billion to $76.5 billion in 1931. It happened because of the stock market crashes in 1929 (Shomai, H., Giblin, G., 2010).
2) Increases in unemployment. At these periods, the international trade dropped and many industries that provide jobs failed; therefore, the unemployment rate during the Great Depression increased from 3.2% at the beginning to 15.9% in 1931. The same situation happened in 2007 when the unemployment rate increased from 5% to 10% (Eigner, P., Umlauft, T., 2014).
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Asset inflation and increases in the housing market are those similar conditions that led to the unstable economy in the US. Easy access to credit caused the consumers increases in their purchasing the cars and housing in 1920. Moreover, after the Great Depression, the number of mortgages continued increased until it leads to another financial crisis in 2007 (Titila A., 2011).
The differences:
1) The source of the asset. There were different price increases. During the Great Depression the prices for the stock was rising, but during the financial crisis 2007-2009, the price increased on the housing. Moreover, during the Great Depression, the deposit insurance didn’t exist; therefore, it was hard to protect and stabilize the prices (Parejo, A., Sudria, C., 2012).
2) During the Great Depression (GD) there was a lot of bank panic because of its failures. In the GD, the dollar was devalued in comparison to gold, the US was on the gold
The similarities:
1) The decline in GDP. According to the financial journals, during the Great Depression, the country GDP declined by almost 25%, in 1929 – from $103.6 billion to $76.5 billion in 1931. It happened because of the stock market crashes in 1929 (Shomai, H., Giblin, G., 2010).
2) Increases in unemployment. At these periods, the international trade dropped and many industries that provide jobs failed; therefore, the unemployment rate during the Great Depression increased from 3.2% at the beginning to 15.9% in 1931. The same situation happened in 2007 when the unemployment rate increased from 5% to 10% (Eigner, P., Umlauft, T., 2014).
3) …show more content…
Asset inflation and increases in the housing market are those similar conditions that led to the unstable economy in the US. Easy access to credit caused the consumers increases in their purchasing the cars and housing in 1920. Moreover, after the Great Depression, the number of mortgages continued increased until it leads to another financial crisis in 2007 (Titila A., 2011).
The differences:
1) The source of the asset. There were different price increases. During the Great Depression the prices for the stock was rising, but during the financial crisis 2007-2009, the price increased on the housing. Moreover, during the Great Depression, the deposit insurance didn’t exist; therefore, it was hard to protect and stabilize the prices (Parejo, A., Sudria, C., 2012).
2) During the Great Depression (GD) there was a lot of bank panic because of its failures. In the GD, the dollar was devalued in comparison to gold, the US was on the gold