The Great Depression is one of America’s worse periods in history. The period officially began on what is commonly referred to as the black Tuesday, 29 October 1929. On this day, stock prices dropped to unimaginable levels plunging the country into panic. For almost 10 years, America had a thriving economy and everyone was optimistic about a better future. However, many people did not know that this was a lull before the storm because on that particular Tuesday the stock market tumbled like a house of cards. In the panic, people rushed to sell their stocks that of course, no one was willing to buy. It then became apparent to everyone that the stock market that was perceived as the best way for one to gain wealth was now the surest way to poverty. (Bernanke 30)
The stock market was not the only one that was affected. The banks that had also invested big amounts of their customer’s money in the stock market were negatively affected by its collapse. This collapse led to the closure of many big banks plunging many people into misery since the banks closed down with their savings. Customers with money in banks that had not yet shut down rushed to withdraw their money. In turn, these banks could not manage to operate due to the huge amounts of money that the clients were withdrawing leading to more closures.
To deal with the tough economic time, individuals began to cut down on their spending. People only bought the essential goods to save their almost non-existent capital. The reduced spending by consumers caused businesses to reduce the wages of their workers to cope with the reduced profits. Even with these measures, some businesses closed down leaving their employees without a source of income. Already owed heavily, individuals also cut down on borrowing to cut down on debt.
The federal government on its part led by President Roosevelt came up with recovery measures that were called the First New Deal. The measures involved giving relief to those who had lost their jobs due to the recession and to farmers who were badly affected due to prolonged drought in the land. The packages also undertook to reform businesses and financial institutions and to bring them back to profitable ways. Lastly, Roosevelt sought to promote the recovery of the economy that had taken a nosedive during the recession.
To achieve these goals, the federal government increased its control over the economy and regulated the supply of money. The government also controlled the prices of commodities and products in the agricultural sector. Though all these measures were geared toward bringing an end to the depression, this did not happen immediately. Historians relate the end of the great depression to the start of the second-word war. This in essence means that the federal governments’ measures did not achieve their main purpose. The people on the other hand learned to live within their means and were patient throughout the recession period.
Today, the US is in a recession and the economy is bleak for many Americans. Like in the time of the Great Depression, many Americans have been rendered jobless and the economy is at its lowest peak. Many people have also lost their homes. This is a trend that was characteristic during the great depression. Like the federal government back then, the Obama administration is also putting in measures to fight the effects of the recession.
However, there is a big contrast between how the federal government dealt with the Great Depression and how the current recession is being dealt with. While the banks were allowed to crumble during the depression, the government is not letting that happen today. The government has pumped in billions of dollars to ensure that there is no repeat of what happened during the depression. Instead of letting businesses sink, President Obama has embarked on a program to ensure that no company crumples. To ensure that no one is homeless, Obama signed into law an incentive that gives up to $ 8000 tax credit for first-time house buyers. This is meant to ensure that no one is left homeless for inability to buy a home.
The government has also been giving cash bailouts to big companies that were on the verge of collapse. An example of this was the bailout of the biggest insurance company AIG. The company got $ 150 billion as a bailout package the largest that has ever been given to a single company. This in turn prevented the company from collapsing thus preserving thousands of jobs and securing clients’ money. This is something that the federal government did not consider doing during the Great Depression. This led to the loss of numerous jobs and customers’ money after the collapse of such kinds of financial institutions.
The great depression was a period characterized by the loss of jobs and the collapse of businesses. Individuals tried as much as they could to cope with the hard economic times. They did this by cutting down on their spending and failing to borrow cash that could in return increase their debts. The government then came up with packages that sought to lessen the effects of the depression. Like in the Great Depression, America is today going through a time of economic recession. The government has however undertaken fast measures to make sure that people do not suffer as they did during the great depression.
Works cited
Bernanke, Ben. Essays on the great depression, 10-40. Princeton University Press. 2000. Print.