Great Recession vs Great Depression

The Great Depression and Great Recession has had an outstanding impact in our nation’s history and is well known to the
When President Barack Obama was inaugurated in January 2009, he inherited a horrendous economy. But was the economy back then really worse than it was during the Great Depression? Obama said in 2009, “The economy was on the verge of a great depression. In some ways, actually, the economic data and the collapse of the economy was worse than what happened in the 1930s. And we came in, stabilized the situation.” For an example, for a limited period of time, the freefall was bigger and faster during the Great Recession than it was during the Great Depression.

“Dow Jones Industrial Average (2000 ­ Present Daily) ­ Charting Tools ­ StockCharts.com.” Dow Jones Industrial Average (2000 ­ Present Daily) ­ Charting Tools ­ StockCharts.com. N.p., n.d. Web. 23 Nov. 2014.

Looking at the chart, the Dow Jones Industrial Average fell from the peak where it was 14,164 in october 2007 to as low as 6,547 in March 2009. There was a 54 percent decrease in a short time period as a year and a half. By comparison, in the 1920s, the decline in stock prices during the first year and a half was about 45 percent below the pre­crash peak. This pattern was mirrored in worldwide share prices.The overall banking situation was much worse in 1933 than it was in 2009, but it is probably true that modern financial instrumentation and technology meant that the crisis spread further and faster than it did in the late 1920s and early 1930s The recession was an ordinary business cycle. Throughout history, there has been multiple repeating recessions over hundreds of years, however this recession was due to the monetary policy. The Federal Reserve System had been established to prevent what actually happened.

It was set up to avoid banks closing down and  avoiding banking crisis. The Fed followed policies which  led to a decline in the quantity  of money by a third.For every  $100 in paper money, in  deposits, in cash, in currency,  in existence in 1929, by the  time you got to 1933 there was  only about $65, $66 left. And  that extraordinary collapse in the banking system, with about a third of the banks failing from beginning to end, with millions of people having their savings essentially washed out. Before the creation of the Federal Reserve, bank panics were usually handled by the banks not the government. It was in large part to improve the management of banking panics that the Federal Reserve was created in 1913. However, in the early 1930s the Fed did not serve as that function. The problem within the Fed was concentrated in the doctrinal. Most of the failing banks were small banks and were not members of the Federal Reserve System. Thus, the Fed saw no particular need to try to stem the panics.