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Avoiding Another Financial Crisis

 

            " In the old days, we used to suffer nearly periodic economic crises, the sudden onset of which was called a "panic", and the lingering trough period after the panic was called "depression". The most famous depression in modern times, of course, was the one that began in a typical financial panic in 1929 and lasted until the advent of World War II. After the disaster of 1929, economists and politicians resolved that this must never happen again. The easiest way of succeeding at this resolve was, simply to define "depressions" out of existence. From that point on, America was to suffer no further depressions. For when the next sharp depression came along, in 1937-38, the economists simply refused to use the dread name, and came up with a new, much softer-sounding word: "recession". From that point on, we have been through quite a few recessions, but not a single depression. But pretty soon the word "recession" also became too harsh for the delicate sensibilities of the American public. It now seems that we had our last recession in 1957-58. For since then, we have only had "downturns", or, even better, "slowdowns", or "sidewise movements". So be of good cheer; from now on, depressions and even recessions have been outlawed by the semantic fiat of economists; from now on, the worst that can possibly happen to us are "slowdowns".(Clair R. T., Tucker P. (2004).
             Dr. Murray N. Rothbard wrote about this terminological evolution in American economy in 1969 sure at that time he cannot have any idea about new term, which will be in use approximately 40 years after publishing of this article, for defining economical misbalance. This term is "financial crisis ". Here in this comparison, I will try to draw parallel between causes and responses to the "depression " in 1929-39 and today's "crunch ". The fundamental reason of Great Depression in USA was decline in aggregate demand which led to a decline in production as manufacturers and merchandisers noticed an unintended rise in inventories, but all this start as it always happens in American economy from the financial sector.


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