1. In 1929, stock prices in New York began to fall rapidly, and on October 29, the market officially crashed. Many banks had used their customer’s money to invest into those stocks, and when the stocks crashed, people all over the world panicked and attempted to withdraw their money. Left with no customers and no money, banks slowly began to declare bankruptcy. Businesses also experienced similar problems as they lost their capital, forcing them to lay off workers and to reduce hours and pay. With lowered or no income, many people had to cut back on spending, reducing the aggregate demand of countries worldwide. Many businesses closed down and the level of unemployment increased, leading to the Great Depression.
2. The current recession was caused by the sudden jump in prices of the US housing market, along with increased rates on subprime and adjustable rate mortgages. Banks were handing out too many loans to too many home owners who would not be able to repay the loans, in part due to the rising interest rates in mid 2007.
3. During the Great Depression, the government (led by Prime Minister R.B. Bennett) made many attempts to bring Canada out of the crisis. At first, Bennett introduced and expanded on work, welfare and other assistance programs. The programs caused a large federal deficit and so Bennett decided to cut back on spending, however that only made the problem worse. Government employees were soon out of work and public work projects were being canceled. Bennett then decided to bring in Canada’s version of the “New Deal,” based on the United States. The deal included the minimum wage, unemployment insurance, and other social programs. Unfortunately, the Liberals had shown that they could not be responsible enough to manage those programs, which led the provinces to become more cautious in accepting the programs right away. Ultimately though, it took the start of another World War to bring Canada out of the Depression.
For the current recession, there have been many plans to help Canada recover. For example, in “Budget 2009,” the government planned on stimulating the economy and producing new job opportunities through funding and improving infrastructure, reducing taxes and freezing EI rates, funding housing construction, improving Canada’s financial system, supporting businesses, communities, and the citizens. Through these budgeting plans, Canada has seen increases in GDP, which means that the recession has ended and we are on our way to a full recovery.
4. Today, Canada has a banking system (widely considered as the best in the world) that manages and monitors the supply of money circulating within the economy. Also, Canada has many kinds of social programs that benefit the citizens who may be going through difficult financial times. For example, unemployment insurance provides a temporary source of income to those who are actively seeking employment. Debatably the most important factor is the development of the internet. Compared to the past and the modern age of today, communication has improved exponentially and information has never been more accessible for everyone in the world.
5. Near the beginning of the Depression, the GDP of the US reached a low of around $750 billion. Near the end of the Depression, the GDP of the United States reached a high of just a little over $1 trillion. The recession caused similar effects to the GDP of the US. The two financial events slowed the growth of the GDP of the US immensely, and the GDP would definitely be much larger if not for these 2 financial disasters.
6. In my opinion, I believe that the Great Depression had a much larger impact on the world than the recent recession did. Back then, we were not as knowledgeable about the economy and its affairs as we are today. We did not have the tools and the experience that we have now to have been able to prepare for such a crisis.
Sources:
