The Financial Crisis of 2008 Essay Example | Topics and Well Written Essays - 750 words

The Financial Crisis of 2008 - Essay ExampleWisman &Barker, 2008.An interesting and relatively new idea is put out by James Livingston in his book Their Great impression and Ours, Challenge. He argues that the cause of the Great Depression in the 1930s was poor wage performance leading to large profits in lookup of few investment opportunities. In another article, Saving Private Savings, or, The God That Fai conduct he discusses at aloofness the plausible reasons reasons for the current economic crisis. While not blaming any ace in particular for the present economic crisis, he opines that economic growth is possible only through high consumer demand and spending. This in turn requires higher savings. In his words, economic growth has proceeded as a function of declining net investment for the last 90 years.As the sequence of events that should have been tax cuts, savings, investments by the government and higher job growth, higher earnings and higher spending got mixed up, hig her private savings from households and business firms were parked in the take merchandise, the speculative bubble had to burst, both in 1920s and now.2) What are some of the similarities and differences between the current crisis and the one that launched the Great DepressionThe Great Depression of the 1930s was brought on by the crash of the Wall highway in September and October 1929.Stock prices tumbled by almost 50% in a matter of two months. The market had probably been overbought and had reached a peak before it came crashing down. The unpredictable stock markets that had been steadily rising for some conviction shed the excess fat and trimmed down considerably. Investors who had made good gains in stock markets the preliminary years had borrowed from banks to invest more on the stock markets. When the markets crashed, there was panic all round. Banks were unable to regenerate debts, news of banks closing down spread and masses cute to withdraw all their savings. Banks were weary and wanted to sit on cash and stopped lending. This led to closure of the manufacturing units dependent on credit which in turn led to large scale unemployment. Finally the government took drastic steps to check the quoin and the economy stopped declining.The similarities between the causes leading to the Great Depression and the economic situation seem to be the greed of human beings. Excess of anything is bad, especially greed. Rothschild is of the opinion that herding or the tendency to follow the crowd and leverage or borrowing to make financial investments, were also common factors. In both the situations, greed fuelled people into higher borrowings and ultimately, they lost out on the capital too. In the 1930s, it was the greed of the common man that led to the Recession, while in 2008, it was the greed of the investment bankers and other financial wizards that led to the recession. Another similarity has been