Comparing The Great Depression And The Great Recession

Although The Great Depression and The Great Recession are similar in that they both negatively impacted the American people and were caused partly by the government’s deregulation; their differences lied within the intentions of their similar causes as well as their approaches for remedies. One way that America can avoid hard times such as these is to keep regulations on banks.

During the Great Recession as well as the Great Depression, many individuals were left unemployed. Due to the Great Recession, employment had fallen “14.6 percent, from December 2007 to June 2009” (Goodman and Mance 4) in the manufacturing industry. During the Great Depression, unemployment rates reached a high of about 23 percent among Americans (Samuelson paragraph 7). Although the unemployment rate of the Great

Recession are not as large as the unemployment rate of the Great Depression, both rates reveal the negative impacts upon Americans in times of economic crisis. The people could not work to support themselves, which meant they were much less likely to spend money on things other than necessities (food, bills, clothing, etc.). Which slowed the cash flow in the American economy immensely.
With the deregulation of banks during both The Great Recession and Great Depression, many faulty loans were given out. Many people were taking out loans that they were not able to pay back. Over time there was a huge influx of bad loans that the banks could not handle anymore. The number of banks that would close down from 1865 to 1919 was about 64 on average per year, but this number skyrocketed to 1,070 between 1920 and 1933 (Klingebiel). The number of people buying on credit that could not pay back during both the Great Depression and the Great Recession was too great which led to an economic collapse. Samuelson analyses how “as economies weakened, debts went into default. Bank panics ensued. Credit and industrial production declined. Unemployment rose. Weakness fed on weakness” (Samuelson, Robert J.).
Despite these similarities between the Great Depression and the Great Recession, they also have their differences. One of those differences being what caused each crisis. One of the main reasons for the Great Recession was the crash of the Housing Market. This was caused by the passing of Acts that deregulated the market. The Community Reinvestment Act, for example, “ prohibited the indiscrimination of borrowers according to their income levels” (Mallen paragraph 3). Although the Act was passed to temporarily aid the people in buying a home, it ended up harming them indirectly through the economy because it allowed many to take on mortgages that they evidently found challenging to pay off. On the other hand, it was the deregulation of banks that caused the Great Depression. Both of these government actions lead to bank failure; however they differed in that they were attempts to help different aspects of the country’s economy. Among the decline of all these banks, the hard earned money in the savings accounts of many seemed to fall with them.
Another difference from both economic collapses was that the Great Depression was able to be fixed with WW II which helped stimulate the economy greatly.

With the production of guns, and other things necessary items for the the war efforts, the economy began to boom. Production was not only helping the US, but production items were being sold to the allies of the United States which was also created revenue to help relieve the United States from the Great Depression. In contrast, during The Great Recession there were many policies that were put in place to try to fix the burst bubble. Only one worked, but “what is now clear, however, is that unconventional monetary policy and extremely low interest rates have also created major financial risks that could hurt the European and U.S. economies in the years ahead” (Feldstein, Martin). These tactics being utilized are setting up a perfect scene for another economic collapse. The policies put in place to help fix the economy during the Great Recession put the United States further into debt, but can have a bigger pay off later if it works out. At best the US avoids a huge economic collapse, or the economy’s bubble will

burst.
By looking at the similarities and differences between the Great Depression and the Great Recession, it is evident that something must be done to prevent future economic crises from occurring. It is clear that the deregulation of economic aspects such as banking and the housing market are two causes of the Great Depression as well as the Great Recession. As a solution, federal involvement must remain to an extent. If there is a need for deregulation, then only certain, minor aspects of banking and marketing should be deregulated. However in regards to major things such as loans and mortgages, regulations should hold strong. This will prevent anyone from taking on more than one can handle financially. Keeping banks and the housing market from crashing and affecting the American people negatively.
The Great depression and the Great Recession were two of America’s greatest economic crises. Despite their differences in forms of recovery, they have many similarities in reasons of failure. Both economic collapses were similar in that many people were unable to pay back debts which eventually led to bank failure. Without the acknowledgment of bank failure every time it is deregulated, the United States will continue to go into devastating economic collapses. The Great Depression utilized a war to help combat the economic situation, and the Great Recession was bailed out by money being pumped back into the system to save the economy of a complete collapse. (Winslow, FDR & The New Deal Notes).The form of recovery will continue to vary depending what party is in office, but regardless of party, all should understand what puts a nation in economic disparity.