The American Financial Crisis

A share is a part of a company or organization that anyone can own and means that you own a part of that company and get part of the profits which is called the rebate.

 Americans were so intent on buying shares before 1929 as businesses were booming and very profitable but at fairly low prices. Every won had lots of confidence in the stock market at this point and making millions and saw it as a gamble they could not lose.

 on the  24th of October 1929 it was black Thursday and the stock market plummeted to all time lows as businesses stopped making profits and share holders all tried to get out quick and so they had to drop the price of shares to allow share holders to sell. Everyone lost confidence in the stock market and businesses fell thousands of people lost their jobs as a result.

 share prices began to fall at the begging of a depression as businesses weren’t making profits anymore so share holders weren’t gaining any money. This meant share holder had to sell their shares and when all the share holders were trying to sell their shares at once no one wanted to buy so they had to drop share prices greatly.

 The link between household spending and business production levels is that when more people are buying products from a business than that business have to make of those products so production levels go up and they employ more people.

 The depression in America led to the depression in Australia because a lot of the products Australia produce goes to America and vice verse but when Australia couldn’t export or import goods they weren’t making any money so they couldn’t produce goods which meant people lost their jobs and the depression started.

The pros and cons of the government’s decision to save carefully during the depression.

 Depression Plan

If there was a depression this is the set of guidelines to follow to bail us out.

The first thing to do is to make sure jobs are available for the public if not put money straight away into creating more jobs whether that means putting money in to big businesses to employ people or putting money into community projects like roads or infrastructure to employ people to build.

Saving is important to we would need to keep quite a substantial amount of money in the bank to keep the situation under control and something to fall back on and feed the public if needed. Most of all we should be making a plan of how to prevent this situation, we should be constantly checking how the businesses with high employ rates are going and what businesses are falling behind in the stock market to ensure this never happens again.

 A recession is the time when business activity has reached its peak and starts to fall until the time when business activity goes to rock bottom. The average recession lasts about a year.

The main cause of a recession or depression is when there is an economic boom and prices are really high people don’t buy as much. When people aren’t putting money into businesses and not buying as much the businesses will make less of that product forcing them to sack workers. And then it falls from there.

The similarity between the current credit crisis and the great depression is that they are both caused by an economic boom where the housing and share prices are really high. In both situations the problem occurs because the stock market and housing prices fall rapidly. People have received loans and invested in something to make them a profit whether it was the stock market or housing but they could not pay the loans back as they lost to much money through the value of housing and stocks falling. That means that the banks lost money and crashed in both situations.

The differences are that the great depression was over the stock market crashing and the current credit crisis is because the market value of housing rapidly came down when people were given sub-prime loans that they could not pay back. The major differences is the way the government has handled things, as for the credit crisis the government are taking a better hold on things and strengthening the economy unlike in the great depression.

The Australian government has done really well looking after the current credit crisis and ensuring it doesn’t affect Australia too much. The first thing they did before the crisis even started was save a lot of money during the boom. This enabled them to put an insurance on all Australians savings and superannuation’s in the bank. This gives the economy assurance and confidence in the government. The governments have been watching businesses closely over the past few months and have been putting a lot of money and effort in to keep them alive and still employing and give families money. An example of this is with ford in Geelong, the government put money into this company and has kept it still producing goods. This has saved 400 jobs directly in the plant and over 1000 of the supplies of ford’s jobs. Another example is with ABC learning centers open till the end of the year to ensure the child care workers jobs and the families that need to send their children somewhere so they can work.

References

Internet 

http://www.pbs.org/fmc/timeline/estockmktcrash.htm

http://www.library.thinkquest.org/03oct/01794/first_hand_accounts.html

http://www.abc.net.au/news/btn/story/s2387803.htm

http://www.school.eb.com.au//all/eb/article-90697503/Fquery3D/Greatdepression