Comparing the Great Depression December 5, 2008
Posted by BDO in Descriptions.Tags: beat, beating, consumer, credit, Debt, depression, economy, econonimc, education, finance, great, loan, margin, mortgage, recession, struggle
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Many politicians want to compare our current economic struggle with the Great Depression of the 1930s. I think it is a very interesting concept to consider. So I made a little chart to summarize some of the main points of the current economic struggles with that of the Great Depression with an emphasis on how consumer debt affected economics. Below is a table broadly comparing the two situations.
| Great Depression | Housing Bubble | |
| Beliefs about the investment before crash: | Stock values will always go up. | House values will always go up. |
| Investment Vehicle of choice: | Margins | Mortgages |
| Amount of Down Payment Required: | 10% | 20% (maybe) |
| Institution hit first: | Banks | Banks |
| Government regulation instituted: | Higher Margin requirements of up to 50% | ??? |
In what other ways can you compare the two situations?
How was consumer debt a prime reason for the Great Depression?
How is consumer debt a prime reason for the current economic struggles?
If we can agree that consumer debt is too high, how might we change our views about debt personally, locally, and nationally?
This information was found on Wikipedia:
A Kid's Guide to Managing Money (Ready-Set-Grow Series)
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