Well how come the http://en.wikipedia.org/wiki/Great_Depression has a cool name, but the 1970s do not? Wikipedia as usual has a great analysis that includes how different countries were affect. Particularly relevant now in our interconnected world.
But the causes are the big issue Causes of the Great Depression which comes down to Keynes and monetary theory (I’m glad I liked my econ 101 classes!). What does sound familiar is that in the 1920s, everyone loaded up on debt to buy cars and things as well as factories. Then there was price deflation and a dramatic cut in spending to keep up on payments (sound familiar). The final face was massive layoffs and then as economic activity dropped, the debt was still there. Then banks failed wiping out savings but not the debt (hopefully this won’t happen this time) and as more loans were called, more people went bankrupt and stopped buying. The monetarist point out the fed wasn’t loose enough, so money supply fell by 1/3 as they let banks fail (not this time around!)
What is most interesting is the differential effects of the American flu:
* Australia. Back then (and now), it was really depending on exports
* Canada. Same deal
* Japan. Had the smart economists. They devalued their currency, so they could export more and they had deficit spending (but not for wars) to stimulate the economy. Not surprising, this caused inflation and ultimately led to the nationalists taking over when the economy was trying to cool.
* France. Was relatively isolated from a trade point of view, so was less affected. Maybe this is more like China today which has lots of exports, but a big internal deman.
* Germany. The war reparations crippled the economy and brought in Hitler.
* Latin America. Really hard hit because they were heavy exporters to the US.
* Netherlands. They had the gold standard for way too long, so they didn’t depreciate their currency, thus choking off exports.
* South Africa. Export driven also, they had a terrible time.
* Soviet Union. Because it was political and economically isolated, there was little impact
While most folks see the depression starting in the stock market in 1929, then economic activity collapese 2 years later. The most interesting thing is that in 1937 there was another recession. The bad part of rhetoric about big bad business, but the good thing was a $5B fiscal stimulus package.