Great Recession vs Great Depression

Difference Between Great Recession and Great Depression

The primary difference between the Great Recession and Great Depression is the length and depth of the events. The Great Depression took place in 1929-1930, was triggered with the major fall in the stock indices and had a huge and long-lasting impact on the US as well as the global economy as it continued for almost a decade. On the other hand, the Great Recession occurred in 2007-2009, was triggered by bursting of the US housing bubble due to subprime mortgage crisis. It was not as severe as that of the Great Depression and also the recovery kicked in relatively early on the back of the countermeasures implemented by the Federal Reserve.

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Key Takeaways

What is the Great Recession?

The Great Recession refers to the economic slump witnessed during the period from 2007 to 2009. It is considered to be the worst economic downturn since the Great Depression. The Great Recession was triggered by the bursting of the US housing bubble during 2005–2006, followed by the global financial crisis that continued till 2009. The phase from 2007 to 2008 is popularly known as the subprime mortgage crisis. According to the US National Bureau of Economic Research, the Great Recession started in December 2007, and it lasted till June 2009, which means that the economic downturn continued for nineteen months.

What is the Great Depression?

The Great Depression refers to the severe global economic downturn in the US in 1929 and continued during the 1930s. It is considered the longest and the deepest economic downturn of the 20th century that swept almost the entire globe. The Great Depression began with the major fall in stock prices in the US on 4th September 1929 and again on 29th October 1929, known as the Black TuesdayBlack TuesdayBlack Tuesday refers to October 29,1929, when many investors panicked and started selling their shares. The trading volume went upto 16 million and Dow Jones dropped by more than 12% in a single day.read more. Although the recovery started in 1933 in most countries worldwide, many economic historians believe that the Great Depression finally got over with the beginning of World War II as the government spending on the war boosted the recovery process.

Infographics

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Comparative Table – Great Recession vs Great Depression

ParticularsGreat RecessionGreat Depression
Time periodThe Great Recession took place during the period from December 2007 to June 2009, which is more than 1.5 years.The Great Depression took place during the period from August 1929 to March 1933, which is more than 3.5 years. However, the lingering effects continued till the late 1930s.
Origination EventThe global financial crisisFinancial CrisisThe term "financial crisis" refers to a situation in which the market's key financial assets experience a sharp decline in market value over a relatively short period of time, or when leading businesses are unable to pay their enormous debt, or when financing institutions face a liquidity crunch and are unable to return money to depositors, all of which cause panic in the capital markets and among investors.read more resulted from the bursting of the US housing bubble during 2005–06.It primarily started with the major fall in stock prices witnessed during September 1929.
Economic impact (Gross Domestic Product (GDP))The US GDP contracted by ~4%, while the global GDP declined by ~5% during the period.The US GDP witnessed ~30% decline, while that of the global GDP was ~27% during the period.
Unemployment RateDuring the Great Recession, unemployment in the US peaked at ~10% in October 2009.During the Great Depression, unemployment in the US peaked at ~25% in 1933.
Fed’s ResponseThe Fed slashed the interest rates and pumped a significant amount of liquidityLiquidityLiquidity shows the ease of converting the assets or the securities of the company into the cash. Liquidity is the ability of the firm to pay off the current liabilities with the current assets it possesses.read more into the system.The Fed increased the interest rates to restrict speculation in the securities market.

Similarities Between the Great Recession and the Great Depression

Although the two economic events have some marked differences, there are some fundamental similarities:

  • Both the events followed periods of excellent economic growth.
  • They resulted in huge economic downturns, and thus they are considered the two greatest economic disasters experienced in the US in the last one hundred years.
  • Both the events were followed by the government’s massive involvement in the economic alleviation and ushering in several policies and regulations.

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