"Construction -- which was a substantial component of investment -- fell because the housing stock exceeded the demand after 1925. " (Temin 9) Termin goes on to say that
Consumption fell because wages, other income, and capital gains all fell, with the fall in wages having the largest effect. Business investment fell because profits fell and -- to a lesser extent -- because the yield on equities rose. Residential construction fell because the stock of housing four years previously was high. Inventories fell because sales fell. But wages, profits, and sales all fell because consumption and investment fell." (Temin 49)
All of these cascading events could and to some degree are occurring today and the cascading effect will likely result in economic fears and realities, "…under freely-competitive capitalism, periods of boom and overproduction were followed by downturns which 'corrected' prior imbalances via falling prices" (Burkett 60) All of the economic events that occurred during the Depression are occurring today,
As banks withdraw credit, consumers and businesses hit by a loss of wealth and high debt burdens retrench on spending, precipitating an economic downturn. In the 1930s, worse came to worst, many banks failed, and a decade-long Great Depression ensued." ("Threat of Falling Market" A01)
Evoking Depression-era memories, Wells Fargo & Co. President John Stumpf a few months ago became the latest banker to predict continuing difficulties in the U.S. housing market as risky mortgages made to overextended borrowers disintegrate into large loan losses. ("Wells Fargo CEO: Housing evokes Great Depression…" NP) Stumpf goes on to say that housing and the lending market is worse than he has ever seen it and it mirrors the early stages of the Great Depression, when many circumstances, not the least of which was overextended families with large paper debt, upside down in mortgages are reeling during a decline in housing prices. ("Wells Fargo CEO: Housing evokes Great Depression…" NP) the occurrences are larger than one individual who might be able to save his or her family from utter loss, but there is a coming depression, the extreme of which we have yet to know.
When these issues dominate the minds of individuals and/or when they experience economic strife, such as unemployment, home foreclosure, business failures, reduced home value and even bankruptcy their spending habits become excessively different. Coupled with all these potential and real concerns are concerns about the increased cost of goods and services, which occurs during recession economies there is a potential for extreme economic change. Extreme economic change can then have extreme global impacts, especially in a cobweb of global interdependence.
It is not often common knowledge among everyday individuals how interdependent nations' economies are upon one another. Or even more importantly how much effect they have on the economy. Like I said before consumers are like ants, they are not completely able to see how their small part affects the big picture. Consumers making unwise decisions, supported by bad economic policy (Mcelvaine 265) and unregulated risky lending (Badger 72), are unaware how much they actually control the economy and caused the problem and how if they make better decisions in the future they might change the situation. This is likely a long time coming though and the economy is also likely to get much worse before then.
Most people even in trade businesses do not have a clear broad understanding of the effect that reduced consumer confidence in the U.S. And a resulting recession has on the demand for trade imports and/or exports or other exchange events at all.
Former Clinton Treasury Secretary Lawrence Summers…was & #8230;closer to the mark in a November 25 op-ed for the Financial Times in which he opined that "the odds now favor a U.S. recession that slows growth significantly on a global basis." Moreover, he warned, "there is the risk that the adverse impacts will be felt for the rest of this decade and beyond…(Jasper 10)
Summers and others then contend that a severe reduction in government spending is called for to reverse the effects of an extreme situation. Yet, this answer does not necessarily...
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