Question

Describe two similarities and two differences between the U.S experience during the Great Discussion and those during the Global Financial Crisis 2007-2009

Answer 1

There are similarities as well as differences between the 1929 economic depression and 2008 financial economic crisis. Both left a significant impact on the ecomony.

The major similarities between these two events was that both were led by high optimism in the prior to the occurrence of the event. The early 1920 experienced high growth and in prior to 2008 there was housing boom and high leverage employed. Both these events created a significant setback to the economy and many companies and bank went bankrupt during these periods.

The difference was in terms of the era and the response from the policy makers. The 1920 was the early stage of the prosperity for the US economy and there was lot of areas where there was very little to no regulation. The financial crisis of 2008 was led by sub-prime mortgage and financial products like derivates. The policy response from the government as well as regulator was far more severe in 2008 then in 1929 because at that time, the idea as what went wrong, it took sometime to figure out but in the case of 2008, it was clear to a certain extent as to the over optimism and underestimation of risk by the banks.