Similarities, but Also Big Differences, Between Today's Crisis and 1930
Possibly the best measure of an economic crisis is unemployment. The rate in October was reported at a fourteen-year high of six and one-half percent. Some think it could reach eight percent or higher. During the Depression, however, one of every four workers was unemployed.
The Dow hit its all-time high in October of last year. Since last year the Dow has lost about forty percent of its value -- even more for the Standard & Poor's index of five hundred stocks.
In just two days the Dow Jones Industrial Average lost almost twenty-five percent of its value. The stock market continued to drop until July of nineteen thirty-two. By then, the Dow was about ninety percent below its high reached in September of nineteen twenty-nine.
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In 1932, jobless and homeless men wait to get a free dinner at New York's municipal lodging house during the Great Depression |
Next October will mark the eightieth anniversary of what is generally considered the beginnings of the Depression.
Before the Thanksgiving holiday on Thursday, the Dow and the S&P rose four days in a row for the first time in months.
An estimated nine thousand banks failed during the Depression. Agencies that guarantee savings and supervise the financial system did not exist at the start. When banks failed, people lost everything. Fear of bank failures led people to withdraw their money, leading to more failures.
This is IN THE NEWS in VOA Special English.
In nineteen thirty-three, Congress established the Federal Deposit Insurance Corporation. It currently guarantees bank deposits up to two hundred fifty thousand dollars.
Like the Depression, the current crisis also involves falling property values. American housing prices fell by almost seventeen percent in the twelve months that ended in September.
What began more than a year ago is often described as "the worst economic crisis since the Great Depression." The downturn is bad, but it would have to get much worse to compare to the nineteen thirties.
And that's IN THE NEWS in VOA Special English, written by Mario Ritter. I'm Steve Ember.
Policy mistakes increased the effects of the Depression. For example, the Federal Reserve let the money supply shrink. This meant there was less money available for lending to people and businesses.
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President Franklin D. Roosevelt at his desk at the White House in 1933 |
President Franklin Roosevelt and Congress established agencies to employ people in public works. Yet employment did not completely recover until World War Two.
Just twenty-two banks have failed this year. But among them was Washington Mutual, the biggest bank collapse in American history.
Housing economist Robert Shiller at Yale University has found that home prices fell by about thirty percent during the Depression. Then, as now, many people lost their homes because they could not pay their mortgage loans.
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