The world economy is beginning to awaken from a nightmare. What hit us, and what was the tossing and turning all about? The popular simile is a comparison with the Great Depression, as in “This is the worst downturn since the 1930s.”
In fact, unless we get hit with another hammer before we fully wake up, the Great Recession is very unlike what the world went through some seven decades earlier.
The Great Depression, like the recent collapse, began with a banking crisis, but of a different kind. Instead of emanating from huge financial institutions in major money markets, the earlier one spread outward from small midwestern banks in the United States and led eventually to a near total loss of confidence.
Depositors pulled their money out into cash or gold, and the U.S. banking system shut down. Investors in other countries also moved heavily into “safe” assets.
Filed under: Economic Crisis, Economic research, Emerging Markets, Fiscal Stimulus, Globalization, growth | Tagged: 1970s, Banking crisis, gold, Great Depression, Great Recession, McCracken Report, stagflation | 3 Comments »