Are We Repeating the Great Depression?


Could the economy 6 months ago be another replica of the Great Depression? People from left and right are being unemployed. Also, the Bush administration did not do a good job in keeping the government straight. Therefore, banks went in to bankruptcy forcing the Obama administration to find a solution. Many people believed that another great depression was among them. But, that was the past, today the economy is not looking as good, however, it has been doing much better. What happened during the 6 months that made this economy look a bit better? I believe the massive spending on the economy has done it. There was a $700 billion bail out to help the economy, then Obama’s $787 billion stimulus package. If $1.4 trillion dollar could not help the economy then what can help the government? But, the money could have been spent much more wisely, such as combining the two $700 billion to make a greater stimulus package. However, the spending was separated in time by at least 3 months. As for the current stimulus package economists thinks that $700 billion dollars is not enough cover the tasks of the stimulus package. The stimulus package has many purposes, some purposes are giving tax credit to people that meet some circumstances. Another purpose is to improve education and advance technology and science. Also, to help the many of those who were affected by the economic downfall. But, why is there even a crisis in the first place? I blame the lenders that were satisfied with lending money to people who couldn’t pay mortgages.

6 months ago the economy looked a lot like the Great Depression of 1929. The Great Depression was a time when Franklin D. Roosevelt took famous actions. Similar to what happened 6 months ago, the Great Depression also had banks collapsed along with the stock market. Therefore, strict regulations were enforced, but the Bush administration did not do such thing. Also, President Roosevelt established programs to help reduce the rate poverty and unemployment by making sets of jobs where it fed the workers and paid them well enough to survive. These arrays of actions were called the FDR’s New Deal. This establishment raised the role of governments in people’s lives. Also, in the 1930’s the Dust Bowl made farmers abandon their farms and move in to the urban centers. When the U.S stock market crashed by 24% the day was named “Black Tuesday”. This had left the investors speechless. The investors borrowed and used their life savings to buy stocks. Since the 1920’s were a good time for stocks that most of them quadrupled in value. But, to have it all gone the investors could not believe it. Black Tuesday is not the only day when the stock market crashed. There is also “Black Thursday” which happened 5 days before “Black Tuesday”. There is one more unfortunate event that occurred for the investors the day before “Black Tuesday” is called “Black Monday”. Not only did the stocks crash, but so did the banks. The bank had no money to lend or loan, due to the stock market crash every one drew their money out. Even though these were hard times President Franklin found a way to save more than 1,000 banks by stopping all transactions for three days. Next year in 1934 the Federal Deposit Insurance Corporation (also known as the FDIC) was established. Since then no one has lost any money deposited. The FDIC insured accounts up to $100,000 dollars, but recently George Bush raised the maximum to $250,000. The Dust Bowl also had a role in the Great Depression. The Dust Bowl was an event where there was a severe drought that made soil turn in to dust and some winds picked up the dust and made a massive dust cloud in the air. These dust could were so large that it was seen all along Texas, Oklahoma, Kansas, Nebraska, Colorado, and New Mexico. Not only did the drought make farming hard but the wind would blow away the top soil. Since farming was nearly impossible farmers had to abandon their farms and move on to larger cities. Agricultural Depression was a major factor in the Great Depression. Everything above gives no choice for bosses to unemploy their workers. They don’t have any money to pay the workers neither do they need any help. The unemployment was so harsh that the unemployment rate rose to 25% compared to the current 10%. Fortunately, Franklin Roosevelt thought of a solution. The FDR’s New Deal helped people get jobs and get paid, but it most known for the Civilian Conservation Corps, Tennessee Valley Authority, Federal Emergency Relief Association, and the Work Projects Administration. Almost half of the people employed into WPA, worked by defending the country. When U.S entered World War II the unemployment rate was drastically cut by defense work. The WPA was disbanded in 1941 with honor. The Civilian Conversation Corps, worked to restore tress in the U.S, especially in the area where the Dust Bowl was. But, it did more then restore trees, the corporation attracted young boys to enroll. Some politicians say crime committed by young boys was reduced 55% just by enrolling in to the CCC. However, the CCC policy let blacks and other minorities enroll, the minorities faced segregation. The minorities were placed in groups of their same minorities. As for the African Americans, 250,000 African Americans were enrolled in 150 all-black CC companies. Although the CCC still had tasks to finish, the Congress thought defending the country was more important. Soon the CCC was also disbanded in 1942. The Tennessee Valley Authority is running as a reservoir today. However, the Federal Emergency Relief Association was disbanded. But, today people are being unemployed, but there still isn’t new jobs to help out the unemployed.

The country’s economy is starting to show a rise higher gas prices and higher stock market prices, but how did this catastrophe occur in the first place. I blame the lenders that gave out loans to people who couldn’t pay their mortgages. During the time, houses were being bought rapidly, therefore, increasing housing prices. With higher house values the lenders could lend higher mortgages creating a safety from foreclosures. But, coincidentally people’s adjustable mortgages got adjusted causing lenders to face more foreclosures than they could sell. This made mortgage backed securities harder to trust and cost less. But, it wasn’t just the lenders that got in to trouble. Some insurers who insured the people who couldn’t pay for their adjusted mortgage also got in trouble. This action helped some people, but in the long run hurt everyone. But, the government is thinking about bailing out the country by using everyone’s tax. The people that weren’t involved shouldn’t have to pay for others foolish mistakes. But, to get out of this problem the people not involved has to pay, since the people that are currently ruined can’t pay due to their debt. Another bill was passed to help the current economy. Obama’s $787 billion stimulus package mostly targets getting the unemployed employed. Although, the results won’t show immediately, most of the effect is suppose to show in the year if 2010 when the stimulus package focuses on infrastructures and other sorts of things. The first part of the stimulus package is supposed to aid houses and cars being sold. The bill will give an $8,000 to first time home/car buyers that don’t have to pay back. But, in my point of view, the money allotted to do this is not enough to suffice the demand. However, if the plan works out as planned it will reduce the rate of price decline for houses and cars. Another part of the package goes in to improving energy recourses. Almost $50 billion will be used to find a better renewable source of energy to create a cleaner earth. Some of the bill goes into upgrading the national transmission grid so that the renewable energy source from the rural areas can reach the urban centrals, preventing future power outages. Although, the plan maybe a good improvement the budget provided for this action is also too small. Then there is aiding to unemployed. The stimulus package provides the unemployed $25 more to their weekly benefits for the unemployed. Also, the bill will extend the unemployment benefits to 33 weeks from the originally 26 weeks. This bill doesn’t just aid the unemployed; it helps low class families as well. For instance, the bill will increase the food stamp benefits by 15% to make food and living more affordable. This aid is fairly funded and will help more than 35 million Americans in the tough economic times. I don’t really think that this is necessary, but Obama is planning to expand broadband to rural areas by expending $7 billion. The broadband companies will expand internet to rural areas, but it is going to cost about $90, making it hard to afford for the rural consumers. But, all of these plans require for new jobs to be made and might cut the unemployment rate for the time being. I think that there should be a consequence for the people who started the crisis. Although, the people are paying their own money to fix what the foolish people made. The foolish people should pay the people back monthly after the crisis. The stimulus package alone isn’t going to be enough to push the country out of the crisis. Therefore, we will need help from other countries to get out of the mess, but also, there still is the $10 trillion dollar to pay back. A solution might be sending some Americans over to China so they could work there and wear off the debt over time. This will reduce the rate of unemployment and give a good skill to the transfer workers. But, to help out this situation the country shouldn’t be dependent on a country, but be mostly independent.

Recently the economy has been showing signs of improvement. It hasn’t improved a lot but, the signs are giving some hope to US citizens. Although, the unemployment rate is still rising, but the rate is has seemed to slow down. As for the stock it seems as if it has been increasing over the past few months. The next sign is the housing market has been showing some mercy as well. Housing prices are still dropping and going in to foreclosures, but the rate is also decreasing. In some states such as North Carolina, the housing prices are actually still slightly rising. Due to the damage done to the banks, the governments were able to get the banks out of debt and stabilize them the banks stocks are also increasing. The banks also tightened the standards and cut off loans. But, there are also signs that should make the people a little more aware. The factories are cutting their inventories; therefore, factories will have less finished products available. But, in April there has been more orders place for manufactured products than last year. So it seems as if the economy has getting better, but in truth, its just declining slower. Economist say that the government is looking like a “U” the top left being the recession and the top right being expansion. We are supposed to be at the lower right part of the “U” where it starts to bend. This has given some economist some proof to say that the end of the recession is in sight. But, the upswing is predicted to be weak. The economy is falling; however, the economy is falling at a slower rate and will soon rise, just not as strong. But, the end of the crisis might be near. The Great Depression that affected many lives for 12 years. Is the U.S going to have to go through another ten year of the economic recession? I think that it actually might. The economist thinks that the government is well represented by a “U”, but I think it is more like a “W”. The top left of the “W” represents the start of the recession. Then the bottom first bottom represents the short, slowly rise. Then rise. But, the rise won’t be as strong at the second peak. Then it will decline once again, but not as much. Then rise once more, but this time it will further than last time.

The economy has struggled in the past and didn’t give up. In result the economy resurfaced again. So the economy is bound to do better once again. But, I don’t really think that the stimulus package will be the main reason the economy will do better. Besides, the $787 billion is not enough to get out of the crisis with money. The thing that will get the country out of the crisis is the unity of all the people put together and helping each other out. If one person employed ten people then about 20% of the 10 people will donate it to other people and the chain will go on. Therefore, we will need to help each other. Helping each other isn’t giving one an extreme amount of help. But, just doing something little like giving the poor a shower and tell them to do the something good to other people as well. This is my theory of the economy.

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