A clash in American economy destroyed its market approximately 80 years ago. It’s been known historically as the Great Depression. A time of great poverty and rising distrust in the government at the time, Americans have worked hard on ensuring it never happens again. Economies however tend to run a cycle, fluctuating constantly but presenting certain tendencies. Recently history chose to repeat itself crashing not only American, but world economy as well. This is now known as the Recession. Depression and Recession, are two terms that describe the decline of a country’s gross domestic product, also known as GDP. The difference between the two is the duration of each with Depression lasting longer. Back in the 1930s the Great Depression hit America with a full force, causing the economy collapse. At the time people had no money to spend, leaving many companies and goods with no choice but to close their doors. During the Recession however, the government tried aiding the consumer by lowering prices and reducing interest rates. Without knowing it they have further contributed to the economical Recession of the country. With low interest rates banks and loaners are now at a loss, for people find it easier not to pay their monthly bills on time. Others find no use in entrusting their money to a savings account because of its high risk and low interest rate. Those two contributing factors have left banks with very little money to loan to consumers and eventually caused many of them to go bankrupt and forever close their doors. The Recession has led to salary cuts for many workers, some of them losing their jobs in the process. Despite the government’s new laws that have reduced rates, many find themselves out on the street unable to repay their mortgages to banks. Because of the low interest in fields such as real estate and cars, prices have dropped down significantly, further fueling the economical decline of the country. It is debatable whether the original interest rates will cause the market to further plunge down or rise back to the surface. After seeing the effects of the Great Depression in the 1930s, the American government has tried its hardest to keep a balance in the country’s economical affairs. Because of factors that are beyond anyone’s control however history has repeated itself, spawning an era of hardship that has currently affected not only the United States of America, but the entire world.
Interest rates – An overview of the Recession
Reduced interest rates