Similarities Between The Great Depression And The Great Recession

992 words - 4 pages

The housing crisis in America is a major problem plaguing the United States' economy. Before a solution is formulated, one must consider the history of the market and the causes of the problem. And after a solution is formulated, one must present an idea for prevention of the problem for the future.
Many people see similarities between The Great Depression in the late 1920s to the late 1930s. The Great Depression was caused by the Stock Market Crash of 1929. Leading up to the crash was The Roaring Twenties. It was right after World War I. The United States' economy was stimulated by producing things for the war. People seemed to have a lot of money. There were many new technologies and new infrastructure. There was a new concept of credit nicknamed "buy now, pay later." Not long after this concept came to be, the stock market crashed.
For the decades before the current housing crisis, buying homes and loaning money was a simple, but strict, affair and had had two outcomes. Either the borrower could pay back the money owed or they could not pay the money back. If the borrower could pay the money back, they could keep their house or whatever they took out the loan for. If they could not pay the money back, the lenders repossess the things that were not paid for. When this happens with a house, it is called foreclosure.
Leading up to the crisis of the housing market, borrowers got mortgages without understanding the terms. Banks were giving out loans to people the banks weren't sure could pay the money back. The closer to the crisis, the higher the frequency of illegitimate loans and mortgages. Because there were so many mortgages on houses that could not be paid back, millions of mortgages were foreclosed on, and the houses were repossessed. To make matters worse, new housing developments were being created in many cities. What happens next is basic supply and demand. There are millions of houses and few people buying houses. The cost of houses plummeted.
I suppose there are quite a few similarities between the two. People were buying things on credit or loan they could not pay back. Laws were made both to help and prevent the situation.
The housing market is not the only part of the economy that has suffered. Many states had already been suffering from the recession, revenue is even lower because of fewer purchases of houses. The labor market and industry have been suppressed as well.
To find a solution, we need to look at what we want to accomplish. We want more commerce within the housing market and fewer illegitimate mortgages. When we go back to the idea of supply and demand, we are faced with two options to increase commerce. We can either have fewer houses, or we can make people want houses more. Since destroying existing houses is foolish, we assume we need to increase demand for houses. To have fewer illegitimate mortgages, banks will have to give...

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