The Great Depression and the Current 2000 Recession

The great depression is one of the longest, deepest and most persistent events that ever happened in American History. Great Depression is believed to have lasted from 1929 to 1939 whose effects were severely bad. Great depression is believed to have started in the United States soon after the New York stock market was hit by financial crisis in the year 1929.According studies by late 1932, the value of the stock had dropped drastically to about 20% as compared to the previous value with 25,000 banks going bankrupt1.This greatly affected the levels of demand and productions which turn resulted to increased levels of unemployment by almost 30%.The recent 2000 recession crisis is a term which describes the effects on the global market caused through financial crisis leading to the collapse of major investment banks in the United States such as Lehman’s Brother Bank, Bear Stearns an d Merrill Lynch. Thesis statement: Though both events had a great impact on various countries economically Great depression and the recent 2000,recession can be viewed to be very different from each other in their characteristics as well as the impact they had on various economies.

To begin with the first difference is exhibited on the impact they have on stock markets and individual economies. The Great Depression was connected with stressful effects which included drop in Individual income, reduction in industrial profits and total gross income tax. More than fifty percent of Americans lost their jobs and a slightly higher percentage in European countries. Cities which depended heavily on construction industry were virtually affected since its operations were completely paralyzed due to lack of sufficient funds. This emerged from heavy policies which were implemented by the financial institutions regarding borrowing and the high interest rates that were being charged by the financial institutions were very high. Cash crop farming was also affected hence contributing to the total reduction in the profits which led to the drop of cash crop prices by 70%. When compared to the side effects of the current 2000 recession there are great differences in their impact though in both events the economic activities were highly affected by the events.

The depression of 2000 significantly impacted on businesses and greatly affected the wealth of people.2. This greatly led to the liquidity shortages in the financial market which in the end contributed to bank solvency and declines in credit lending. Furthermore, this situation led to the loss of investor confidence in the financial institutions which greatly impacted the global stock markets causing the financial securities to suffer huge losses. In both events, the various countries were affected since these periods slowed down the economic activities making it hard for individual borrowers to obtain loans from financial institutions. This was due to the inability of the financial institutions to accurately price the various risk involved in mortgage related financial products since the governments were not in a position to adjust the financial prices. To respond to the situation in both cases the governments as well as the central bank was forced to put in place both monetary policy and fiscal stimulus policy to control the rate of currency supply as well as institutional lending

Another difference pointed out is the mere fact that over the last 79 years since the occurrence of great Depression from the year 1929 and 2008, enormous changes have occurred in the economic procedures which actually differentiate the two events. Secondly the stock prices in the recent 2000, recession were not greatly affected as the way it was during the Great Depression period since the 10- year price to earnings ratio of stocks in the market did not no actually go down to the extreme levels as in the period of Great Depression. The other important difference is the mere fact that during the 2000 recession the inflation rates were adjusted accordingly in the United States which contributed to the raising of housing prices which was not the case during the Great depression period where inflation was considered to be a major problem by several economies immediately after the depression period had occurred. In addition, the recession of early 30’s is believed to have lasted for over three years’ where the rate of money supply especially the currency plus demand deposits drastically fell by 30% which was not the case in the 2008 and 2009 recession periods as most of the credit control was done by the Federal reserve3. The other major difference between the two events is the mere fact that in the current 2000 recession period, the levels of unemployment rate were not high as during the Great Depression which is believed to have increased by almost 25%4.

The current 2000 recession was caused by the failures on the demand side of the economy which was caused by the shadow banking systems. This mostly affected the institutions which were regulated due to risk taking. When compared to the Great Depression there is a great difference since the recession was mostly caused by poor monetary and fiscal policies that were implemented to curb the situation. Furthermore, unlike the Great Depression the current 2000 recession was marked by global market integration and synchronization which are believed to have lesser effects on the financial institutions and it is easier for the financial institutions to recover from the economic down turns.

The great depression led to financial breakdowns in major economies such as Europe where Germany and Britain was greatly affected. This is quiet different with the current 2000 recession since it led to liquidity shortages as well as collapse of major financial institutions in the United States but not the world as the impact of great depression.Moreover, great depression led to the collapse of international trade where countries like Germany and Britain sought protection through high traffic and quotas imposition on their goods and services. This is greatly different when compared to the effect of the current 2000, recession which actually led to the collapse of international trade though measures taken to control the situation were totally different. In the current 2000, recession various economies resorted to export increase and decrease in imports

In conclusion both the events are seen to be different in view of their occurrence as well as their impact on various economies. These events are very significant in the history of economics since it helps economists establish various impacts that led to their occurrence.


Keynes, John M. The general theory of employment, interest, and money. New York: St. Martin’s Press, 1964.


  1. Hall, Thomas E., and J. David Ferguson. The great depression: An international disaster of perverse economic policies. Ann Arbor: University Of Michigan Press, 1998, 123
  2. Bernanke, Ben S. Essays on the great depression. Princeton, N.J.: Princeton University Press, 2000.
  3. Rothermund, Dietmar. The global impact of the great depression, 1929–1939. London: Routledge, 1996.
  4. Rosenof, Theodore. Economics in the long run: New deal theorists and their legacies, 1933–1993. Chapel Hill: University of North Carolina Press, 1997.
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