The collapse of the housing market and unemployment caused the most damage. Between 1991 to 1992 unemployment had gone back up to 2.6 million. Negative equity meant home owner were paying mortgages far higher than their homes were worth. Many people could simply not keep up with the increased prices and resulted in them losing their homes due to the bank repossessing them. The recession hit close to home for the Tories, effecting the middle class not just the working class of the industrial north.
Known also as Black Tuesday, October 29th left stockholders shattered with recorded losses reaching $40 billion dollars (Kelly, n.d.). Many banks and financial institutions began collapsing which led to irretrievable, uninsured deposits and savings. Fearing further loss, people began spending less which led to a decrease in production and an increase in unemployment. As companies began to fail, the government devised the Smoot-Hawley Tariff in order to protect American businesses. The Tariff placed high taxes on imports leading to a decline in international trade.
Only six months after Hoover took office, the economy collapsed and the Great Depression began. Many factors caused and contributed to the Great Depression of 1929. One factor would be the overproductions of many goods in the 1920s led to worker layoffs Another factor was that easy credit led to people spending more than they had, and it led to a rapid inflation that eventually caused people to stop buying. The Federal Reserve Bank, created in 1913, did a poor job which also led to the great depression. It did not monitor interest rates to help regulate the economy when overproduction and inflation had started to cause unemployment in 1928-29 and the economy seemed likely headed toward collapse.
Recently, the market is on an uptake with its improving stocks & bonds. The light in a year-plus-long tunnel is bringing both hope and realization. The market improvement is also shedding a truth on a troubling facet of the economy, the 401(K). The realization Stephen Gandel, of “Time Magazine”, has highlighted in his article “Why It’s Time to Retire the 401(k)” focuses on the sad truth that 401(K) is not effective and thus can not be relied on. 401(K) has become ineffective because of the corruption of big business, the misunderstanding of and as a result a mishandling of the 401(K) accounts, and its correlating dependency on the market’s success.
JC Penney was named on this list for its disappointing stock price relative to the retail industry. Its stock price was down almost 45% from January 1 1995 to December 31 1999, while the S&P Retail Department Stores Index increased by almost 43%. Due to declining sales and a deteriorating customer base, CalPERS believes the market has lost confidence in Penney's management.
The number of products imported from other counties has increased over the years and exports have seriously decreased. So, it seems that the United States finds itself in a very similar situation as in the Great Depression of the 1930s. The government didn't learn from their mistakes made back then therefore the economic situation has returned. Instead they find themselves with an economy overloaded with product, financial inflation and deflation which has lead to serious workers unemployment. Therefore, as I stated before The Great Depression came about because of three main causes, in my opinion these three causes were not properly dealt with which has people believing that the United States has fallen into another depression similar to the one in the 1930s.
FBN has made significant investments (property, plant and equipment) on account, thereby getting into financial trouble by owing their creditors quite a bit of money. FBN made too many investments (on account) and their cost of services increased faster than their sales. Yet another indicator of financial woes is the Profitability Analysis. By observing the Return on Assets, we can see that in two years, the ROA declined from 7.5% to 0%. Such a decline (and such a low percentage) indicates that management is not efficient in employing the company’s assets to make a profit.
In our case, for years six and seven we see an increase of 37.5%, and then in years seven to eight there was a 16.3% decrease. This could be caused by either selling less, through an increase in the cost of goods sold, or a combination of the two. The gross profits come as no surprise when the net sales of decreased significantly between years seven and eight. The company attributes the loss in sales to the lack of sponsors for their professional rider customer base. Many of competition bikes customers are sponsored and with the current economy many sponsors are cutting back funding which will have a negative impact on sales for Competition Bikes Inc.
Because of these economics times that the world is currently in, the company found its business in disarray subsequently an action plan was put in place for the company could be saved. More than 34,000 of jobs were lost in the US and Canada alike at that time. As of January 16th 2009 a week after the motions were initiated in court, Circuit City decided to close all 567 remaining stores in the United States. The lost of these jobs have not only affected the company but their employees have suffered irreversible damage in these economic times. The communities were these jobs were lost have been devastated.
Monetary and Fiscal Policy actions will take some time to affect measurably other markets. A decline in the real Gross Domestic Product of 6.2 percent annually in quarter 4 of 2008, was reported by the Commerce Department. Most categories of final sale products contributed to the decline. Jobless trends of November and December continued in January wherein businesses trimmed 600,000 positions. Recent indicators display worsening conditions as mid January new unemployment claims have increased.