Bush claimed that in September 2008 his chief economic advisors said that “The economic situation could at some point become worse than the Great Depression.” His presidency should be solely responsible for the death of the U.S economy. The unemployment rate in 2008 through early 2009 and the rate at which it rose was comparable to most of the recessions occurring after World War II, but was dwarfed by the 25% unemployment rate peak of the Great Depression. The economic decline of the Great Depression was -26.5%, markedly steeper than our modern recession’s -3.3% decline which was devastating. The extremity of the 1929 decline was enough to shut down more than half of the countries banks, close thousands of businesses, and leave millions with nothing. The numbers reflect that our Great Recession is nowhere near as catastrophic as the Depression, but this could be our modern Depression and we’ll use our American ingenuity to find a way through it.
The Minsky Model of a General Financial Crisis A Synopsis of ‘Chapter 2 -- The Anatomy of a Typical Crisis’ in Manias, Panics and Crashes - A History of Financial Crises by Charles P. Kindleberger and Robert Z. Aliber, Sixth Edition, Palgrave Macmillan, Copyright 2011 By William R. Henry, Ph.D. (May 08, 2013) Since the end of the Great Depression “…financial failure has been more extensive and pervasive” in the 30-year period 1980 to 2010 than at any other time leading up to the present day (p. 7). Four financial crises occurred in this 30-year period. The closest in time of the four financial crises to the present period is the recent liquidity crisis, the so-called Great Recession of 2007 – 2009, beginning in the United States, Great Britain, Spain, Ireland and Iceland. Eventually all of the countries of the Eurozone succumbed to the disequilibria of the Great Recession with the Eurozone’s suffering further intensifying because of the emergence of the so-called Sovereign Debt Crisis, a sub-crisis morphing out of the Great Recession in 2010 and 2011, involving Greece, Portugal, Spain, Italy and Cyprus. The Sovereign Debt Crisis is still ongoing having recently extended itself into calendar year 2013.
This problem has been coming on for some time. From the 1960s to about 1980s workers in finance made little more than those in the rest of the private sector, on average as it should be. Then, things changed: from the ’80s on, administrations embraced deregulation, undoing many of the rules put in place in the wake of the Great Depression to limit banks’ riskiest, and most lucrative, investments. Gone were the limits on interstate banking; down came the wall separating commercial and investment banks. From 1979 to 2006, the financial industry’s share in the nation’s corporate profits grew from a fifth to almost a third.
During autumn of 1929 the stock market began behaving highly volatile. Stock market prices were expanded to just about breaking point, and then suddenly it crashed. Because of the Stock Market Crash the gross national product dropped 40 %, $6.1 billion in 1929 to $3.5 billion in 1933 (The Canadian History Page). The Bank had no money left because of the effect of the stock market crash. Wages in the industrial sector were not keeping up with huge increase in manufacture and profits.
The book Dumb Money, written by Daniel Gross describes the era of “Dumb Money” and even “Dumber Money” causing the credit bubble that occurred prior to the 2008 financial crisis. Gross explains that it wasn’t “skeezy money managers” that caused the recent financial tsunami, but rather Ph.D. economists, central bankers, CEO’s and investment bankers. Gross reveals that the four factors that precipitated the Dumb Money era were low decreasing interest rates, increasing asset prices (real estate in particular), plentiful borrowers, and a strong debt market. He explains that due to the “shadow banking system” American financial culture was too fixated on short-term gains rather than long-term gains and encouraged excessive borrowing, lending, and trading. Gross criticizes
Being that these types of assets are From significant parts of savings, this is a logical argument. 1982 to 1989, the Dow Jones Average went from 884 to 2,509 which drastically increased capital assets’ values. There was an impressive drop in the unemployment rate during Reagan’s administration as well. 17 million new jobs were created and the unemployment rate fell from 9.7% to 5.5% by the time Reagan’s presidential term ended (Niskanen & Moore 1996). The hours worked by working aged adults grew during
What Caused the Great Depression? Many believe that the stock market crash that occurred on Black Tuesday, October 29, 1929 is one and the same with the Great Depression. Actually, the stock market crash was only one of the major causes that led to the Great Depression. Two months after the original crash in October, stockholders had lost more than $40 billion dollars (Doc D). Even though the stock market began to regain some of its losses, by the end of 1930, it just was not enough and American truly entered what is called the Great Depression.
Running head: The Economy, Monetary Policy, and Monopolies The Economy, Monetary Policy, and Monopolies Shalanda Massenburg Professor Lloyd Amaghionyeodiwe ECO100 December 4, 2012 Analyze the current economic situation in the U.S. as compared to five years ago. Include interest rates, inflation, and unemployment in your analysis. The United States is the most advanced countries in the world. There has been a downfall in the number of houses being sold; interest rates have hit rock bottom, and a record weakening in the federal budget balance. All this is due to the downward fall in the economy.
Despite this, net income and income from continuing operations both dropped sharply in 1980. Which item on the income statement was most responsible for this drop in income? Net income dropped significantly from U.S. $37 millions in 1979 to -U.S.$225.2 millions in 1980 attributed to the two factors. The most crucial factor was the rise in cost of goods sold. In 1980, with the influx of North Sea oil, the pound appreciated strongly relative to currencies in which Massey sold its products.
Sky rocketing the company as the sixth-largest energy company in the whole world. However during 2001, due to unstable leadership and financial mistakes. Enron began to collapse and filed for bankruptcy. Labeled as one of the biggest case of bankruptcy the U.S. Justice Department released an investigation regarding the company’s transactions. During the investigation, CEO and former CEO Lay and Skilling faced up to 40 charges including conspiracy, making false statements on financial reports, securities fraud and wire fraud.