The Great Depression and Great Recession October 3, 2011 Jim Butkiewicz University of Delaware

Comparisons The recent Great Recession has resulted in significant economic losses and personal suffering Still, the Great Depression was far worse

Recovery from the Depression Treasury’s expansionary monetary policy

Recovery from the Depression Treasury’s expansionary monetary policy Fiscal policy not expansionary Bank lending stagnant $20 - $22 billion Federal lending by new agencies ◦Home Owner’s Loan Corporation ◦Federal Farm Mortgage Corporation ◦Reconstruction Finance Corporation ◦Commodity Credit Corporation ◦U.S. Housing Authority and Federal Housing Administration

The Great Recession The downturn was due to a real shock – the bursting of the housing bubble Initially expansionary monetary response became contractionary, but has since reversed Impact of fiscal stimulus questionable ◦State and local governments constrained and have significant unfunded liabilities Fiscal policy now constrained unlike depression Bank lending a constraint

You are known by the company you keep

Remaining Hurdles Administration’s anti-business attitude and policies (Obama similar to FDR) ◦Uncertainty regarding health care policy ◦Uncertainty about regulation ◦NLRB – Boeing decision Continuing housing deflation