Great Depression - Comparison With The Late-2000s Recession

Comparison With The Late-2000s Recession

The causes of the Great Recession seem similar to the Great Depression, but significant differences exist, also, as discussed in the above sections of this topic. The current chairman of the Fed, Ben Bernanke, had extensively studied the Great Depression as part of his doctoral work at MIT, and is implementing policies to manipulate the money supply and interest rates in ways that were not done in the 1930s. Bernanke's policies will undoubtedly be analyzed and scrutinized in the years to come, as economists debate the wisdom of his choices. Generally speaking, the recovery of the world's financial systems tended to be quicker during the Great Depression of the 1930s as opposed to the late-2000s recession.

If we contrast the 1930s with the Crash of 2008 where gold went through the roof, it is clear that the US dollar on the gold standard was a completely different animal in comparison to the fiat free-floating US dollar currency we have today. Both currencies in 1929 and 2008 were the US dollar, but in an analogous way it is as if one was a Saber-toothed tiger and the other is a Bengal tiger; they are two completely different animals. Where we have experienced inflation since the Crash of 2008, the situation was much different in the 1930s when deflation set in. Unlike the deflation of the early 1930s, the US economy currently appears to be in a "liquidity trap," or a situation where monetary policy is unable to stimulate an economy back to health. In terms of the stock market, nearly three years after the 1929 crash, the DJIA dropped 8.4% on August 12, 1932. Where we have experienced great volatility with large intraday swings in the past two months, in 2011 we have not experienced any record-shattering daily percentage drops to the tune of the 1930s. Where many of us may have that '30s feeling, in light of the DJIA, the CPI, and the national unemployment rate, we are simply not living in the '30s. Some individuals may feel as if we are living in a depression, but for many others the current global financial crisis simply does not feel like a depression akin to the 1930s. —

1928 and 1929 were the times in the 20th century that the wealth gap reached such skewed extremes; Half the unemployed have been out of work for over six months, something that wasn't repeated until the late-2000s recession. 2007 and 2008 eventually saw the world reach new levels of wealth gap inequality that rivalled the years of 1928 and 1929.