Monday, March 9, 2009

Living It Up in the Roaring Twenties (1)

Author: Miriam Medina

Unfortunately, the ending of the year 2008 and the beginning of the year 2009 has found America as well as the entire Globe in horrendous economic conditions which are sucking us into its chaos with a disturbing velocity making money scarce and credit more expensive. With the stock market plunging into a pit of despair, disturbing reports of plants/factories shutting down, massive unemployment, bankrupt businesses and banks closing their doors, farm and home foreclosures at an all-time high , many jubilant investors who were celebrating record highs in the stock market only a year or two ago, are now severely crushed by their losses.The catastrophic economic baggage from one year to another continues to be dragged, while people struggle with their normal overhead expenses of supporting themselves as well as their family. It is a time when people are seeking employment, being fired, or trying desperately to hang onto jobs they already have.

Panics, Depressions, Economic Crisis, resulting in bankruptcies of companies and individuals, where millions are unemployed, homeless and reduced to beggary, is the greatest nightmare feared by all; the wealthy, the investors the businessmen as well as the working class population. While some were short-lived , those of long term were more complex. After the worst of the crisis was over, it would be back to business as usual, resuming its former prosperity and growth until a new economic crisis would eventually occur.

The United States has passed through several notable financial crisis, such as the ones in 1815,1819,1837, 1857,1869, 1873, 1893, 1901 and 1907, with the exception of 1837, 1893 and 1929.These years were defined as "major depressions because of the depth and duration of the collapse . Some attribute these panics to overexpansion and debts, overextended notes and discounts, overinvestment and falling prices, etc.

The Panic of 1929 and the ensuing depression were the most terrible the nation had ever suffered. "The stock market crash on October 23, 1929 wiped out an average of more than a billion dollars worth of paper values a day. A staggering total of 15 million were unemployed, and those who continued to work did so under greatly reduced wage scales." The flow of capital into productive enterprise slowed down to a trickle. The country was suffering from under consumption not overproduction. Banks were weighted down with government bonds, real estate mortgages based on greatly appreciated valuations, and highly speculative securities.

Some analysts are comparing the current economic situation to the crash of 1929 followed by the Great Depression. Although there are obvious similarities, there still may be differences. This is why each panic or economic depression needs to be critically studied in its full entirety to have a better understanding of the cause/effect relationship. It should also be evaluated on the basis of the era in which the financial crisis occurred , not in another, in order to properly assess the extent of its effects on American capitalism.


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