Comparing the Great Depression to the Great Recession Essay

Comparing the Great Depression to the Great Recession - Essay Example Economists have often compared the two economic bad that have affected people throughout the world. This paper shall provide a comparative discussion on the two economic phenomena and draw parallels and differences on the two. To achieve this, the essay shall provide an outline understanding of the events that lead to the 1930s great depression, and the economic policy responses that were executed to handle the situation, and thereafter provide an understanding of the events that precipitated the 2008-2009 recession and the policy responses. Finally this paper shall provide a discussion of the major points raised by analysis of both phenomena. The exact cause of the market crash that lead to the great depression in the 1930s has been a subject of great debate, in as much as most economists contend that the 1929 New York market crash was just the smokescreen of the great depression; however, the crises are more complicated and multifaceted (Eichengreen et al., 53). The great depression affected every bit of the world economy: manufacturing, agricultural, financial, political and social, and it is deemed the longest crisis with grave consequences. Much like the global financial crisis that occurred in the late 2000s, the United States led the way, and soon spread to the rest of the world. After the First World War, the period in the 1920s was synonymous with a economic boom, and the world economy was enjoying a period of improved growths, and in a similar manner the United States experiencing high growths was being referred to as the roaring twenties. The economic boom created a situation in which stock prices rose in every sector of the United States, and was not only confined to real estate; in fact, Galbraith (16) insists that between May 1924 and December 1925, there was an average of eighty percent rise in stock prices. To maximize their income on investment that were escalating, investors borrowed heavily, but economic theory always predicts