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Causes Of The Great Depression

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Global Crisis of 2008 in Comparison to the Great Depression of the 1930s Introduction Causes In America, the Great Depression is one of the defining moments in U.S history. The cause of the Great Depression is complex and due to many unfortunate factors, the most notable cause being the stock market crash of 1929. The crash was caused mainly due to too many consumers borrowing irresponsibly because of the mentality that the stock market will continue to rise and rise, forever (http://www.history.com/topics/1929-stock-market-crash). The extreme volatility of stock prices led consumers to stop spending, which caused production to collapse and the collapse in stock prices. The banks had the same thought as consumers and would speculate in the …show more content…

It all begin when the federal reserve began lowering interest rates from 6.5% in 2000 to 1% in 2004. These low interest rates encourage consumers to buy houses and builders to build houses, however the low interest rate was not an accurate reflection of the true demand for houses in the market. The government amended the community reinvestment act to encourage banks to offer mortgages to offer low income families who would ordinarily not qualify for a loan, known as sub-prime mortgages. As the federal reserve began to raise interest rates again, housing prices began to drop and homeowners noticed their mortgages were more than their house was worth. This led to foreclosures and defaults, further depressing housing prices and shrinking the capital of financial …show more content…

Whereas, the Global Crisis being caused by too many banks’ lending irresponsibly without proper background checks as it allowed them to make more and more mortgage-backed securities. Between the two crises’ it is clear that, the people and banks had a false belief that the stocks and bonds would continue to grow without any repercussion. The government also had an interesting role in the matter by creating an amendment that helped stop the Great Depression, to then repeal it and help cause the Global

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