It is a common topic that is discussed by national news programs and has become an everyday topic of discussion. It has affected everyone and the recent recession is known to be the worst economic crisis since the great depression. You can refer the statistics to know how the economic recession is deepening. It is difficult to point out just one cause for economic crises as there are many factors that have caused the depression. The great depression is a result of many combined factors. People were eager to become rich in 1920s as the business was growing rapidly. Many industries were encouraged to manufacture more and more products due to the post war boom. Many countries were left reeling from taxes and large debts as a result of World War I.
A similar feature contributing to our economic crises and great depression is credit. Before the start of depression, debt was built up by a large number of people as credit was extremely easy to obtain. The stock market was turned into a gambling operation as many people started investing into it by borrowing or from their profit. People started buying stocks in hopes of selling it at a higher price. The stocks no longer had its real value. When there was a burst in price people rushed to sell their stocks and hence the stock market crashed.
We could see similar situations in the financial markets, especially in real estate. People started investing in real estate and hence the house prices touched the sky. Because of this many banks started offering loans for people who were interested in buying land, houses etc. Due to these practices many financial institutions like Citigroup and Fannie Mae lost money. When the prices of real estate burst every section of the economy was affected and led to great depression.
Comments are closed.