Great Depression 2

"Is another Great Depression formulating before our eyes?"

Great Depression Part I (1929 to 1932)

• Caused by "The Roaring 20's" where American consumers and businesses relied on bank loans and credit to purchase goods and stocks in a very bullish stock market. Debt began accumulating and "Black" Tuesday triggered panic which eventually led businesses to cut jobs and encouraged people to withdraw any cash they had left from failing banks.
• On "Black" Tuesday, October 29, 1929 the Dow Jones lost $14 billion or 11.7% of its value.
• 13 million people became unemployed (approximately 25%)
• Industrial production fell by nearly 45% between the years 1929 and 1932.
• Home-building dropped by 80% between the years 1929 and 1932.
• Home values dropped more than 30% during this time period.
• From the years 1929 to 1932, about 5000 banks went out of business.
• Members of the Rockefeller family bought large sums of stock to demonstrate to the public their confidence in the stock market.
• The Dow Jones reached its bottom in 1932 and didn't return to pre-1929 levels until 1954 or 22 years later.
• The Federal Reserve was unable to inject capital to the economy since the economy was based on the Gold Standard (amount of gold in possession).
• Severe droughts were experienced during the 1930's was a man-made disaster caused from deep plowing of the Great Plains, which killed natural grass that normally kept soil and moisture trapped in the ground.

Great Depression Part II (2008 - TBD)

• Caused by defaulting bank loans given to people for the purchase of over-valued homes which ultimately caused a housing bubble. Banks also began repackaging these home loans as mortgage-backed security investments and began selling them to foreign investors. Housing prices began to decline which left home owners with interest-only loans that would soon increase to monthly payments that were impossible to make before the owner could "flip" the house for profit. A catastrophic chain of events soon followed as houses began foreclosing.
• On Monday, September 29, 2008 the Dow Jones lost $1.2 trillion or 6.9% of its value. (A total drop of 777 points, the largest point drop in history.)
• 728,000 people became unemployed from Jan to Sept 2009 (total unemployment currently at 6.1%)
• US Industrial production fell a sharp 2.8% in September, the biggest decline since December 1974.
• Housing starts fell 6.2 percent in August 2009 to an annual rate of 895,000, the fewest since January 1991.
• Home values on average have fallen close to 15% from their peak values.
• So far, Lehman Brothers and Washington Mutual have gone bankrupt, while Wachovia and Merrill Lynch were acquired by Wells Fargo and Bank of America respectively. Investment banking industry completed eliminated as a business.
• Goldman Sachs Bank and General Electric asked Warren Buffet to pledge $5 billion each to instill confidence to the market.
• The current Dow has fallen to 8451 points, a level not seen since 2003 during the Internet bubble.
• The Federal Reserve is injecting $700 billion into troubled businesses and $250 billion into failing banks.
• Hurricane occurrences along with severe climate changes have increased due to society's dependence on fuel, which creates excess carbon emissions that are the main cause for Global Warming.