The Great Recession
According to experts, there has never been a worse economic decline than the Great Recession with the exception of Great Depression. Nevertheless, economists note that there is no likelihood of the current economy to face another depression. Economists viewed the Great Recession as a worse economic event due to severe recessions that had been experienced before in the 1980s and 70s. However, this was different. The effects of the Great Recession were felt by the entire world because of its time-span. Following the Great Depression, the time-span of the recessions that were considered the longest was 16 months. These occurred in 1981-82 and 1973-75.
The Great Recession began in the December of 2007. The time when this recession is likely to end remains unclear. Perhaps, it has taken a time that is longer than the other recessions encountered in the past. This is a quite extensive recession when compared to the other recessions. According to the Federal Reserve, low production has been recorded in over three-quarter of the existing industries in one year. Additionally, many states are recording an increase in the rates of unemployment. The rate of unemployment is now surpassing the worst rate that was reached thirty-two years ago. There is also an increase in the rate of household wealth decline since the World War II ended.
Nevertheless, this situation might worsen as time goes by because there is no progress that is being made in any sector. Due to Great Recession, Gross Domestic Product (GDP) has fallen by 1.7%. The expectations are that this will fall further to approximately 3.4% before the end of this recession. It is expected that the federal government will release a revised quarterly GDP report of the year. This report will show the yearly decline rate of about 6.6%. Economists note that a 3.4% decline of the GDP is not good because it is the largest decline since WWII.
It is surprising that economists assert that there is no other depression that might occur soon. Their assertion is due to the fact that household wealth’s decline as well as consumers spending has not reached sharp levels that might ignite another depression. The GDP decline that has been recorded is lower than the decline recorded between 1929 and 1933. The capacity of the current economy can absorb almost any shock that may arise from a reduction in the net worth of households. Transforming a recession to a serious economic downturn takes several factors and not crashes in the stock market or a burst in housing bubbles.
There is a lesson that is learnt from any economic downturn. Using new policies that were formulated in the 1930s may help in softening the economic range. Despite a reduction in private businesses and consumer spending, the government is still able to maintain money circulation within the economy by paying Social Security benefits, local and state spending as well as unemployment insurance and other corporations. New programs of lending money have been implemented by the Federal Reserve which increases money supply in the economy. There is no relief that is provided by the mere assurance that no other depression will hit the economy of the US. This is because citizens of America are still facing the effects of the depression.
A stagnation of the economy is bad for any large economy like that of the US. Economists’ efforts are aimed at preventing a repetition of the mistakes that were committed in the 1930s. These include inflexible tariffs, limiting production levels and price limits. These have negative impact on foreign trade. Among the mistakes that were committed by the 1930’s government at the time of the Great Depression include price controls and production limitations as well as stringent protectionism (Isidore). Nevertheless, there is an improvement made so far in regards to policy implementation. However, the implication of this is not that the US now has immunity against depression.
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Isidore, Chris. “The Great Recession.” CNN Money, March 25, 2009. Web. 20 February 2014. http://money.cnn.com/2009/03/25/news/economy/depression_comparisons/