Thursday, June 11, 2015

Were the causes of the financial crisis now and that during the great depression the same?

To some extent, I would say yes.  In both cases, the
collapses were caused by "bubbles" in the economy.  These are times when the price of
something gets way higher than it ought to be.  People put lots of money into buying
that particular thing and then when the price collapses, they lose their
money.


In the Great Depression, the major bubble was in
stock prices.  These went up more than they should have and lots of people put a lot of
money into buying stocks.


In the recent crisis, the major
bubble was in housing.  People paid too much for houses and then the banks and such paid
too much for the mortgages.


In both cases, when the price
of the good (stocks or houses) collapsed, people lost lots of
money.

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