How “Great” Is This Recession?

Posted on 11 October 2009


Great Depression

History has a habit of repeating itself, maybe in not exactly the same sequence. Today’s fiscal woes are a reflection of the Great Depression of the twentieth century.  An economic tailspin ending in financial disaster and many suicides, the Depression began with the collapse of Wall Street in 1929 as a result of greed and speculative trading.  Overnight, millionaires became paupers and America’s lifestyle altered drastically.  President Herbert Hoover turned a blind eye to the situation, erroneously treating it as a market change that would correct itself:  an entire decade would pass before the market rebounded.

 

Wall Street’s collapse impacted the banking industry, which was short on cash. As rumors of a banking failure ran rampant, depositors rushed to retrieve their savings.  It was like that scene from the film It’s a Wonderful Life, where everyone in the small town demanded to pull their money out of George Bailey’s Savings and Loan — except that the 1929 reality was driven by millions of depositors.  Their actions created a domino effect, toppling banking institutions nationwide and causing the economy to hit rock bottom.

 

Unemployment skyrocketed as businesses struggled to stay afloat.  With no income, the housing market took a nosedive; thousands of people lost their homes and farms to foreclosures.  Mother Nature added to the havoc, bringing drought and dust storms that plagued America’s farmlands.  Fearing that all this horror was the wrath of God, people all across the country prayed for forgiveness.  Most of all, they prayed for deliverance.

 

The difference between the Great Depression of the 1930’s and the Great Recession of 2008-09 was that the government did not extend bailouts during the earlier crash.  In addition, insured savings accounts, unemployment insurance, credit cards, and Social Security did not exist.  The future looked bleak in the ’30’s for those who had not jumped out of windows.

 

Franklin Delano Roosevelt succeeded Hoover as our nation’s President, inheriting the daunting task of national recovery.  Roosevelt realized the answer to solving the problem lay in the spending power of the people.  To stimulate their spending, he passed the NRA (National Recovery Act), the WPA (Works Project Administration), and the CCC (Civilian Conservation Corps).  He also instituted the SEC (Securities Exchange Commission) and the FDIC (Federal Deposit Insurance Corporation).  Roosevelt charged these organizations with the following tasks:

 

The WPA – Getting Americans back into the workforce and earning incomes.

 

The CCC – Taking young, indigent men off the streets to work on public projects.

 

The SEC – Overseeing financial institutions to ensure that they did not engage in fraudulent practices.

 

The FDIC – To bring trust back to the banking industry, so that depositors would reopen their savings accounts.

 

FDR also set up food banks to put food on the table of many starving and undernourished Americans.  He used the radio to broadcast his “Fireside Chats” and thus became a calming and authoritative voice during hard times.

 

As time passed, the President also enacted Social Security. This was a mandatory savings plan designed to enable those who retired at age 65 to enjoy their twilight in dignity.  All of these were the legacy of FDR, the only President in the history of the United States to be elected for four terms.

 

Despite his best efforts to jump-start economy, the Great Depression dragged on.  Its only solution was World War ll.  With the enactment of the draft and the demand for equipment and supplies needed to fight the war, the economy boomed.  Happy days were here again!

 

I lived through the Great Depression and witnessed men begging for food on the streets on cold wintry nights.   I remember how my mother made them sandwiches and hot drinks, and allowed them to sit in the entryway of our row house, out of the biting wind to enjoy the small offerings that must have seemed like manna to them.

 

The saying goes that “out of something bad comes something good.”  The Great Depression brought families together to enjoy each other’s company.  Holidays were anticipated with relish because it meant sitting around the dining room table for a good meal with several generations of our families.  In some respects, we may be a bit better off today with this current recession.  But in others, such as family intimacy and expressions of gratitude for what we still have, we are lacking. 





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22 Responses to “How “Great” Is This Recession?”

  1. michael says:

    the economic recession made a lot of workers jobless. my best friend and me lost our jobs because of job cuts. i hope that our economy would recover soon.

  2. Janet Reyen says:

    Our country was also hit hard by the Economic Recession. At least we are seeing some signs of economic recovery now. I hope that we could recover soon from this recession.
    *…….

  3. Cameron258 says:

    Our country had been so much affected by this Economic Recession. there are lots of job cuts and company shutdowns. We are seeing some signs of economic recovery right now and we hope that it would continue.

  4. | Acneguy says:

    I think we are also seeing some signs of recovery from the Economic Recession. Of course, we have no idea of how long it will take to completely recover, but some say it’s going to be longer than for the other recessions in decades. I also scanned an article yesterday that said business owners need a new set of tactics to do well during recovery.

  5. Jennefer Jones says:

    I’m doing a research paper on the cause of the great depression and your blog is proving to be alot of help, but I am trying to find even more detailed information. I found an article on the cause of the great depression but I’m not sure I believe the ‘official’ story… I’m trying to find the TRUE cause of the great depression, if you have any tips of some other additional sources for info please let me know.peace out

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  7. Deidra Banta says:

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  9. Brianne says:

    How outrageous you say.

  10. George says:

    I think Greenspan is getting senile, today he said that you can stop asset bubbles by increasing capital requirements. That just increases the cost of credit. The next time you have a real estate bubble, you’ll have the same problem, assuming that banks are still in the business of loaning against real estate. If you want to stop this problem, then eliminate the federal subsidies for real estate development and investment, then require people in that industry to put their own money at risk instead of someone elses. If Greenspan really wants to change the banking system, though, then simply ban 95% and 90% LTV loans. Require a bigger equity cushion. BTW, the “too big to fail” argument is a fallacious one. During the Great Depression, Canada had no bank failures. The reason was that their banks were very large. The banks closed branches, etc., but none of them failed. By contrast, the US was dominated by thousands of very small banks, and we had more than 10,000 of them fail. So there is nothing inherently unsafe about a banking system dominated by large banks. The real problem with large banks is that during good times, they don’t provide enough competition for each other.

  11. Drew Lanzilotta says:

    Cheers. My partner and i truly take pleasure in looking through articles and blogposts.

  12. Rosendo Rhoton says:

    I can’t stand my life, it’s going nowhere, I never have any fun I’m always stressed and everything always seems to be against me. I have no job (not really trying anymore, don’t care have a ton of money in bank and on EI), no girlfriend hell never even kissed a girl, still living with parents and everytime I try to make my life better it only ends up worse, it doesn’t matter what I do.

  13. Treasa Halima says:

    Someone I work with visits your blog regularly and recommended it to me to read too. The writing style is great and the content is interesting. Thanks for the insight you provide the readers!

  14. Caitlin Baker says:

    Our home business was really affected by the Economic recession, we have to cut jobs just to cover up our losses. fortunately, we have already recovered.

  15. bukmacher says:

    Excellent post i am sure that i will come back here soon

  16. Adrianne Rissler says:

    Thanks dude, this is extremely good information, cheers.

  17. Sharlene Scavo says:

    Banks really get under my skin! They start to go under and they get bailouts from the government, but when my two best friends and neighbors need aid, the US Govt doesn’t do anything about it.

  18. Le Montayes says:

    Very intereresting reading. thx

  19. Ozella Lyster says:

    thank you lots, I must comment that your website is amazing!

  20. Adan Laliberty says:

    I feel far more persons will need to read this, extremely good info.

  21. Gregory Despain says:

    Very informative article…


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