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How Did The Great Depression Affect The Economy In The 1930's

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It is no secret that the Great Depression radically impacted the lives of those who lived in the United States in the 1930’s. The depression began in 1929, and continued to worsen until 1933 where the employment rate was over 20% (Hubard and O’brien). By the 2000’s economists believed it to be very unlikely that the U.S Economy would ever plummet in the same way that it did during the Great Depression but in 2008 the United States experienced its greatest economic crisis since the 1930’s. The subprime mortgage lending and the bursting of the housing bubble brought on the 2008 financial crisis. This resulted in long-lasting effects that have shaped the economic world we see today (White). Issues within the housing market began to arise in home-mortgage subprime lending. Lenders and originators had increased the number of unconventional mortgages with high default risks (White). A conventional mortgage or loan consists of an interest rate and a time period. When these two components are known from the beginning and remain constant they are considered “fixed.” On the other hand, an unconventional mortgage is the opposite and will have a varying rate of some sort. These riskier, unconventional mortgages were accompanied by less credible borrowers. As a result, unconventional mortgages increased condo and house prices. …show more content…

The logic of the growth of the bubble is very simple. Those who had increased their wealth substantially with the extraordinary increase of stock prices were spending based on this increased wealth in all areas of life (Baker). The increase in stock wealth led people to buy bigger and more luxurious homes. This increase in demand triggered the creation of the housing bubble because in the short-run the supply of housing is fixed (Baker). Buyers assumed that prices would continue to rise leading them to purchase homes for far more than they would have

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