The Great Depression and the Great Deal of Recession - Term Paper Example

 The Great Depression and the Great Deal of Recession Recessions and depressions are words majorly used in a county’s economy as well as that of the globe. Many people foresaw the occurrence of depression and recession by the end of the decade 2000-2010. For instance, Foldvary (2007) saw it coming most probably in 2008, something that came to pass. It hit many countries; consequently, their economic status was compromised. Most of these countries were impoverished, and some of them up to date are still recovering from it. Understanding and comparing these incidences of the Great Depression and the Great Deal of Recession, therefore, is crucial in this work and the centre of focus is the U.S. As Foldvary (2007) explains, there is a difference between depression and recession. An economic recession occurs when total sum of productivity falls and lasts for a long time interval. It is identified in U.S when a fall in gross household products and the total yield of goods produced lawfully occurs for two consecutive quarters (Foldvary, 2007). On the other hand, depression of an economy takes place when there exist a tremendous decline in output below a long- run tendency (Foldvary, 2007). It commences during a recession when Gross Domestic Product (GDP) drops below the long- run trend but does not end there. It ends in recover when GDP goes up above the same trend. This means that an economy is still in depression when it recovers and expands but is still below the long-term trend as Foldvary (2007) observes. In terms of comparing the Great Depression to the Great Deal of Recession of 2008, a number of issue surfaces and are clearly manifested. Both acquire similarities and differences in an obvious way. They are similar because credit-fueled bubbles precede them both. To explain this, the Great Depression took place there was Roaring ‘20s. It didn’t end there because of the Greenspan NASDAQ and housing bubbles which took place just before the Great Depression. Verick and Islam (2010) also indicate in their discussion paper that the Global Financial Crisis came about from the bursting of the housing bubbles in the US. According to them, the housing bubbles resulted to the worst fiscal difficulty in US history. A question now rises in regard to what state economy was at before the crisis. In fact, it was by no means stable as many people have alleged. Hand in hand with that, it is also saddening to not that even the poor countries of the time did not benefit from the stronger economic growth, Verick and Islam (2010). In trying to compare the two cases about depression and the great recession, so many factors still stand out. According to an article by Informed Traders (2008), one of the outstanding similarities support the idea raised above by Verick and Islam (2010). The article suggests that a long phase of credit fueled bubbles preceded both Great Depression and the Great Deal of the Recession. For instance, just before the occurrence of the Great Depression, there had existed a Roaring ‘20s together with housing bubbles, Greenspan and NASDAQ, Informed Traders (2008). Another similarity is that both Great Depression and Great Deal of Recession had a government intervention. This was in terms of the policies that were aimed at preventing felling asset prices as Informed Traders (2008) denotes. As much as the Great Depression had these interventionists at work, the Great Deal of Recession also had similar people involved in ensuring that prices of commodities were regulated. In so far as there are numerous similarities between the two, there also exist diversities that set them apart from each other. The differences are what made them stand out on their own owing to distinct qualifiers. One of them is that both Depression and Recession totally short of a gold standard, Informed Traders (2008). The gold standard is intended to serve as a constraint to the expansion of money supply. To explain this further, the article states that the dollar value was relatively brought down to the value of gold. All these happened during the Great Depression time. Again, a difference manifests itself in the manner in which the US handles her debts during the Great Depression. America initially had no numerous debts as it was during the Great Deal of Recession, Informed Traders (2008). This is a difference that stood out vividly in at that time. In terms of the debts still, foreigners in the US are the ones who fundamentally owned them. As a result, there was an economic warfare, for the foreign debt owners were capable of undervaluing the dollar through selling dollar reserves or Treasury bonds. Finally, another difference between the Great Depression and the Great Deal of Recession is shown in terms of foreign currency and the US dollar. When the value of the foreign currency cheapen hand in hand with that of the US dollar, the expected result is that the value of gold and silver rise. Accordingly, when the same foreign currencies decrease in value, the US dollar falls in accordance with them, Informed Traders (2008). This aspect of falling resulted in the Great Depression and Recession of 2008. It is clear that the Great Depression and the Great Deal of Recession were a crisis of their time. The calamity came principally as a shock to many agencies, academics and policy makers. It also surprised investors of that time who neither saw it coming nor suspected anything worth alarming, Verick and Islam (2010). The ultimate result, however, was and is still unwelcoming. It resulted into many miserable situations that faced individuals of different countries. More adversely, economies of developing countries were greatly affected, including that of the US. Owing to these there have been numerous approaches by different educated individuals like the economists. Their efforts have not only been to eradicate poverty in America but also in many countries and other parts of the world. An Austrian Business cycle Theory is in place and in consideration. It denotes that a corrective recession eliminates poor investment practices, which transpire from an unnecessary expansion of the money supply, Erick and Islam (2010). Different deals have tried out various approaches while putting efforts to eradicate poverty that had previously engulfed the US and other parts of the globe. As it has been seen above, impoverishment came about as a result of the Great Depression and the Great Deal of Recession of 2008. The deals that are in place to see us out of poverty include the New Deal and another approach during the years of the Great Society. The efforts to eradicate these still were endless. In 2008, short selling was banned at the beginning the so talked about Great Depression. In addition to that, packages considered to be incentive were approved as a valid remedy to the entire problem that was at hand. This was done at the commencement of the Great Depression. Talking about the Great Society, it is all about efforts of Johnson administration. Its constituents include federal legislation, innovative plans, initiatives and agencies that Johnson himself enacted. All these are what construct the Great Society, Ben West (2010). It comes along with an idea of the Progressive Tradition initiated by reformist tradition in America. New Deal arose henceforth from the progressive movements, and it did not end at that. For sure, a philosophy of the New Deal is the ultimate outcome of the progressive tradition. Therefore, comparing the New Deal and the Great Society approaches to poverty is an ideal issue to consider in a trial, to verify them accordingly. The New Deal has got distinguished reformist aspects that Jonson administered. Amongst them are moral advocacy of the common man’s interest, evaluation of the social conservatism and passion for technocratic expertise. Achieving this ensures that the ordinary men are up-to-date with information about policies and that they achieve goals they sought. Other identifying characteristics of the New Deal also include apprehension for a corrosive influence of big business plan and a belief to use the government to carry out the reforms, Ben West (2010). Support for capitalist social system tampers with the great business plan as a whole thus triggering the need to advocate for properness in terms of their management. It is noticed that Johnson’s program acquired the above characteristics hence qualified as to create a Great Society. As much as the New Deal was had an emphasis on the presidential leadership, it was considered a selfless ambition that aimed using government policies and agencies as a means to relieve the disadvantaged in the society. The same agencies are used as a considerable reform that all the poor people in the Great Society look up to, Ben West, (2010). As Johnson, the administrator denotes, consequences of the Great Society were quite different from those of the New Deal in greater depth. The two have a relationship aimed at liberating the US politics offering desirable opportunities and even limitations that come by them. The Great Society used academic ideas to drive policies, something that they strongly share with the New Deal, Ben West, (2010). In its approach to poverty still, the Great Society believed that poverty in itself was both a political and a cultural problem. On the other hand, the New Deal engaged itself in many reforms aimed at reducing poverty while raising the US economy. A brilliant example is their take in education, which they used as a means to do away with poverty. The New Deal had a better understanding in practicality, playing a role of as facilitators to eradicate poverty, Ben West, (2010). There exist a clear distinction between the New Deal and the Great Society in their approaches to poverty. Johnson as an administrator chose open-ended commitment at a cultural level as he overlooked the economic level. The end result of this is an ultimate failure to eradicate poverty in our communities and all the countries across the globe. As much as many efforts are put into place to alleviate poverty, it should be noted that for the approaches to succeed they have to be politically viable. This goes hand in hand with visible efforts alongside faster delivery of results to the entire community or a country. Poverty, therefore can be eradicated, yes, if the efforts put in place do not overlook strategies of boosting the world’s economy. This is all about embracing the New Deal. After assessment and considering both situations in great depth, the New Deal stands out and outweighs the Great Society. This is the only sure way of eradicating the poverty prevailing in our countries. References Verick, S. & Islam, I. (2010). The Great Recession of 2008-2009: Causes, Consequences and Policy Responses. Hampshire, UK; ILO/Palgrave Macmillan. Foldvary, E. F. (2007). The Depression of 2008. Berkeley, CA: The Gutenberg Press. West, B. (2010). The Great Society and the Progressive Tradition. Retrieved from http://akerue.net/blog/academic/2010/06/the-great-society-in-the-context-of-the-progressive-tradition/ Informed Traders. (2008). Comparing the Great Depression with the Crisis of 2008. Retrieved from: http://www.informedtrades.com/237417-comparing-great-depression-crisis-2008-a.html Read More