Mar
13
What would an economic depression look like in present day? Would it be similar to the one in the 30’s?
Filed Under Economic Depression
Economic depression has been mentioned lately on news channels…
Contrary to what most would think, we are embarking upon a "baby depression". A depression is said to have taken place when banks fail. Well last week the biggest bank in this country, Bear Stearns, collapsed. This was brought on mainly by the depreciating value of the housing market and the amount of bad debt they incurred. I don’t think this will be the last bank to fail during this troubling economic time. The depression of the 1930’s was brought on by people buying stock on margin (credit). When prices collapsed the borrowers couldn’t repay and so the banks failed. The same thing is happening in the housing market. Credit brought on the last depression and credit is bringing in the "baby depression" in which we are embarking on.
High energy prices are also a key factor. If people can’t afford to go to work then the economy grinds to a halt. Creditors can’t be paid, stocks tumble, well I think you can imagine the rest. The important thing to remember is that credit brought on the last depression and is bringing on this one too.
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3 Responses to “What would an economic depression look like in present day? Would it be similar to the one in the 30’s?”
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We are a long, long way away from a depression. The only thing I would worry about causing a depression at this time would be a nuclear attack on the US. Just one bomb could do it. The talk about a depression is from the news media that are hoping to change the government’s administration. We are not even sure we are in a recession yet!
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no. the 1930s great depression was then, not today. the govt and business have implemented too many safeguards for that to occur. remember, the great depression started with the stock market granted too many ‘on margin’ buying. when the margins were called in for payment, there was nothing to back up the credit owed. banks have failed over the years but not because of a run on the bank. they failed due to bad business practices by that bank. fed govt backs depositors. in the 30s, this wasn’t around. go back into history with a good history book and use the checks and balances of today’s world. you will see that the great depression occurs once every 100 years, is usually checked in its place and safety measures are put into place immediately to prevent further damage. this is also what happens when you literally put all your eggs into one basket (and slip!). what happens is an omelet made for a king!
References :
Contrary to what most would think, we are embarking upon a "baby depression". A depression is said to have taken place when banks fail. Well last week the biggest bank in this country, Bear Stearns, collapsed. This was brought on mainly by the depreciating value of the housing market and the amount of bad debt they incurred. I don’t think this will be the last bank to fail during this troubling economic time. The depression of the 1930’s was brought on by people buying stock on margin (credit). When prices collapsed the borrowers couldn’t repay and so the banks failed. The same thing is happening in the housing market. Credit brought on the last depression and credit is bringing in the "baby depression" in which we are embarking on.
High energy prices are also a key factor. If people can’t afford to go to work then the economy grinds to a halt. Creditors can’t be paid, stocks tumble, well I think you can imagine the rest. The important thing to remember is that credit brought on the last depression and is bringing on this one too.
References :