Y2K: ANOTHER GREAT DEPRESSION?

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THE PROBLEM:

POSSIBLE EFFECTS

SOLUTIONS

 

SIMILARITIES WITH THE GREAT DEPRESSION:

CAUSES OF THE GREAT DEPRESSION

  1. speculation – stock investment
  2. irresponsible behavior – buying on the margin
  3. business mergers – holding companies
  4. maldistribution of wealth – tax cuts for the wealthy
  5. natural adjustment of the market

 

INDICATORS OF CRISIS

The following data from John Kenneth Galbraith, The Great Crash and Robert Heilbroner, History of the American Economy

 

WALL STREET

1923 to 1929:

1900: 15% families owned stock

1929: 28% families owned stock

 

CORPORATE PROFITS

1916–1925: profits rose $730m per year

1926- 1929: profits rose $1.4b per year

 

THE CRASH

Thursday, October 24, 1929:   12, 894, 650 shares sold

Monday, October 29, 1929:     16, 410, 030 shares sold

 

MARKET VALUE

September 1, 1929: $89b

July 1, 1932: $15b - loss of $74b !

 

GOLDMAN SACHS STOCK

Opened for public sale:   $104 share

Value in 1932:         $1 ¾ share

 

BANK FAILURES

Jan-June 1929: 346

By 1932:               4,835

Estimated 1929-1932: 9m bank accounts lost!

 

MALDISTRIBUTION OF WEALTH

Brookings Institute:     1929                              

1920-1920:

1929: 80% had no savings