Boom and Bust: Economic highlights of the past century
Differences between the Great Depression 1929-33, and
the Great Recession of 2008
1. Use of Deficit Spending and Monetary Policy
Hist of econ boom & bust: http://www.youtube.com/watch?v=83sX8Ent4vo 2.4min
Understanding the National Debt and Budget Deficit
http://www.youtube.com/watch?v=3ugDU2qNcyg 6 min oct2012
2. Creation of many postwar institution, e.g., WB and IMF to fix
economic problems considered as responsible for the Great
Depression of 1929-33. A special US law- Employment Act of 1946,
was passed to empower the President to prevent another depression.
3. WB and IMF monitoring global economies reduced sharp
fluctuations in boom-bust econ. cycles.
4. Dollar & Euro have stabilized global monetary stability in
modern times. Such stability in Europe prevented the
hyperinflation in the German and Hungarian currencies that
occurred during the great depression of 1929.
5. Coordination between International institutions - IMF and
International investment institutions - helped to stop the
worsening of the crisis and facilitated coordinated
responses in dealing with the international economic crises.
GDP Growth: what is recession?
A recession is when economic growth contracts for two quarters
straight and lasts more than a few months.
It is recession when economic activity significantly declines and
the decline is spread across the economy.
The decline will be visible in real GDP, real income,
employment, industrial production, and wholesale-retail sales.
Under depression, GDP drops 10%, e.g.: During 1929 and
1933, the GDP dropped > 30% in the US.
Global Industrial Production
Great depression: Industrial production massively
declined for 3 years
2008 Recession: Although markets globally was
jolted by the initial shock, trade and production
continued at slower levels.
Globally, compared to the Great depression period,
production is increasing the output.
Bank Foreclosures
From January 30, 1933 to March 1933, US bank failures:
9,096 (represented 50% of US banks).
From December 2007 to May 2009, bank failures: 57 (0.6
% of US banks).
Unemployment
At the intense level of the Great Depression:
unemployment 25%.
During 2008 recession: unemployment 9.80%.
Length of Average Unemployment
As in the Great Depression, unemployed are without a job
for a long duration.
By the beginning of 2010, Americans have been
unemployed for 35.2 weeks while trying to find a job
Protectionism
Free Trade vs. Protectionism
http://www.youtube.com/watch?v=7njIlZ2xYq0 3min 2011
As during the Great Depression, 2008 crisis and
recession are global.
The new institutions and structures of groups of
countries - G20, the E.U. Commission, and the IMF,
have worked to avoid protectionist policies.
Double Dip During Depression …is it likely to repeat now?
During the Great Depression there were two major economic
stages of dips.
1. From August 1929 through March 1933.
2. From May 1937 to June 1938