Question

Compare and contrast the Great Depression of 1929 with the Great Recession of 2009 that began with the 2007 mortgage crisis. What could the US government have done to prevent the Great Depression? The Great Recession of 2009? To what extent, if any, do you agree with economists that the Great Recession of 2009 is over? Explain and justify your answer.

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Answer 1

Answer

Compare and distinction the nice Depression of 1929 with the nice Recession of 2009, that began with the 2007 mortgage crisis. What may the U.S government have done to stop the nice Depression? The Great Recession of 2009? To what extent, if any, does one believe economists that the nice Recession of 2009 is over? Explain or justify your answer
Compare and distinction the nice Depression of 1929 with the nice Recession of 2009, that began with the 2007 mortgage crisis.
recession Key differences between the Great Depression and the 2008 US Recession are as follows:

--A stock market crash led to a reduction in expected income and tight monetary policy. Higher tax rates and a banking crisis then drove the economy into a depression – summarizes the main causes of the Great Depression of 1930's

--A decline in housing prices and stock prices, plus a financial crisis, summarizes the main causes of the Great Recession in 2008

--A key difference between the Great Recession and the Great Depression is that the American government reduced taxes during the Great Recession in 2008 but raised them during the Great Depression

--During the Great Depression, U.S. real GDP fell by about 27 percent, in comparison to the 3.7 percent decline during the Great Recession.

During the Great Depression and the financial crisis of 2008, direct U.S. government intervention in the economy was necessary in the nation. There were four major causes why the Great Depression was long and severe which are mentioned as below:
1. Monetary instability: The money supply contracted by 33 percent between the period 1929 and 1933, and it took another tumble during the period 1937–1938.
2. Smoot-Hawley trade bill: The 1930 legislation rose tariffs by more than 50 percent and as a result there was a sharp reduction in world trade.
3. 1932 tax increase: There was a huge tax hike that reduced demand and undermined the incentive to invest and produce.
4. Structural policy changes: Persistent major changes, specifically throughout the Roosevelt years result in uncertainty and undermined investment and business designing

Thus from the above discussed causes it can be concluded that U.S government have prevented the Great Depression if have realised the importance of free trade; monetary stability; avoidance of high tax rates; and avoidance of price controls in the market, entry restraints, and persistent policy changes that generate uncertainty and undermine the security of property rights.

The Financial Crisis Inquiry commission concludes that the crisis was Foreseeable and Preventable, and was caused by number of factors:

• There were widespread failures in financial regulation, including the Federal Reserve's failure to stem the "tide of toxic mortgages".

• Dramatic breakdowns in corporate governance sector that resulted to "reckless" actions and taking on too much risk by financial institutions.

• An explosive mix of excessive debt and risk by households and Wall Street.

• Policymakers who were not well prepared and lacked a "full understanding of the financial system they oversaw".

• Fundamental breaches of accountability and ethics "at all levels". Mortgage-holders took out excessive loans which they don’t intend to pay back, and lenders made loans they knew the borrowers could not afford.

-The financial crisis in the year 2008 was an "avoidable" disaster that was caused by widespread failures in government regulation, corporate mismanagement, and heedless risk-taking. The economy of U.S. rose slowly after the recession ended in mid year of 2009. If the above discussed factors that resulted to crisis would have been taken into consideration seriously financial meltdown would not had happen. With a systematic combination of tighter monetary and fiscal policies through an approach of mixed economic policy, tighter financial regulation, and robust controls over the credit rating institutions and the shadow banking system, could have led to the financial crisis being prevented

In agree with economists that argues that the Great Recession of 2009 is over. The U.S. economy began growing in 2009, and has nearly averaged 2.1 percent annual growth since then. The total employment (government plus private) has increased and average hourly earnings of workers on private payrolls grew modestly